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Carl Icahn, not known for taking a flyer on emerging technology companies, is injecting an additional $50 million in Motricity Inc., bringing his total investment in the mobile content software maker to $100 million. "I don't do many of these, but I think this one has real potential," said the financier. "They do have a pretty good revenue stream." Icahn, who also invested $50 million in Motricity in March, added that he is impressed by the company's technology and strong position in a market pegged for enormous growth. The funding, part of a $185 million round that Motricity expects to close in the coming weeks, is a major boost for the Durham, N.C., company. Yet it also raises the pressure on Motricity, which with the latest funding will have raised a total of $405 million, to move quickly toward an initial public offering or, failing that, to find a buyer. Other previous investors in Motricity also are re-upping in the company. Chicago broker-dealer Advanced Equities Inc. is investing another $100 million, adding to the $50 million that it previously provided. Other participants in the round are hedge fund Cyrus Capital Partners LP and venture capital firm New Enterprise Associates. Motricity declined to disclose which of its other investors would contribute to the latest financing round. These include Intel Capital, Massey Burch Capital Corp., Noro-Moseley Partners, Technology Crossover Ventures and Wakefield Group. One investor, who spoke on condition of anonymity, said Motricity likely will seek an exit next year. "Do I think that by sometime in calendar 2008 the market should expect this company to approach the capital markets? Yes," the investor said. "Now they have the critical mass they need. It's really just about execution from here." Wireless carriers, media companies and other customers use Motricity's software to deliver mobile content, such as ringtones, music and games, to cell phones and other portable electronic devices. The company has contracts with 11 of the top 13 wireless carriers, including AT&T Inc., Sprint Nextel Corp. and Verizon Wireless, and Motricity claims it can service 95% of the handsets in North America, making it the leader in the sector. Its top competitors include Qualcomm Inc., Amdocs Ltd. and VeriSign Inc. Motricity is also counting on acquisitions to complement organic growth. On Monday it announced a deal to buy the mobile services division of InfoSpace Inc. for $135 million. For 2007, the two companies will record a combined $100 million in pro forma revenues. "The challenge for Motricity is to find the absolutely killer [application] that is going to drive their numbers," the investor said. "It's just a matter of time until they find the application that will give them the impetus to be a big company." Last year, Motricity also tried to buy m-Qube Inc., which was acquired for $250 million in cash in March 2006 by VeriSign, a provider of Internet infrastructure and telecom services. Chris Chuang, vice president of strategic development at Motricity, said the company expects to have a number of exit options down the road, including an IPO, but that for now it is focusing on building its business. "If we do that we'll be afforded a number of value-creating options for shareholders, whether it'll be an IPO or something else," he said. "Certainly, we think the shareholders will see some good returns." Potential acquirers also could come calling. Buyers could range from Google Inc., which has said it wants to enter the handheld market, to wireless gear makers such as LM Ericsson Telephone Co., Motorola Inc. and Nokia Corp. Roger Entner, senior vice president, communications sector, for IAG Research, said investors are bullish on Motricity because of what they regard as its strong management and its strategic relationships with wireless carriers. "They're actually very diligent with the money that the investors are giving them," he said. Entner predicted that Motricity will go public, noting that few mobile services providers could afford the company. For his part, Icahn said he's willing to bide his time as Motricity grows. "I have a lot of patience," he said. "It's not a business for widows and orphans. There's a lot of risk in these [technology companies], and you have to be prepared. My thinking is if it's good, it's going to be good. You can't force it."  Deal Video
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