Babylon Ltd. gained on optimism that acquisitions will help fuel the translation software maker’s growth as the company announced an investment and distribution pact with Somoto Inc.
Shares of the Or Yehuda, Israel-based company, which gets most of its revenue from advertising agreements with Google Inc., advanced 1.6 percent to 22.86 shekels at the close in Tel Aviv. Babylon’s stock has rebounded 24 percent from its yearly low on March 28, when it declined on investor concerns changes to its partnership agreement with Google were slowing sales. The benchmark TA-25 Index was little changed.
Babylon will invest 4.6 million shekels ($1.3 million) in cash for a 4.6% stake in Somoto, a software developer that helps Internet sites generate income from traffic. Tel Aviv-based Somoto will offer Babylon products in at least 50 percent of its software downloads, according to a filing today. In June, Babylon bought search page personalization company Woolik after earlier saying it would consider an acquisition to boost growth.
“The share is up because this is yet another deal that enters the company portfolio,” Beni Dekel, an analyst at Union Bank of Israel Ltd., said today by phone. “The company is turning to new growth avenues via acquisitions.”
Babylon is seeking to cut its dependence on Google to less than 50 percent of revenue, Chief Executive Officer Alon Carmeli said in April. Also that month, the company signed a four-year accord with Yahoo! Inc. in an effort to diversify income sources.
The deal with Somoto is expected to add revenue of a few million shekels a month to Babylon, Dekel said. “For a small investment, Babylon is getting more traffic.”