Harman Spending Almost $1 Billion on Software Acquisitions

Harman International Industries Inc. agreed to pay almost $1 billion to buy two software companies as the maker of automotive infotainment systems seeks to expand that business.

The acquisitions are $780 million for Symphony Teleca, a software services company, and $170 million for Red Bend Software Inc., which specializes in connected devices and over-the-air upgrades, according to statements Thursday.

“The two companies change the DNA of our company,” Harman Chief Executive Officer Dinesh Paliwal said on a conference call. “We want to establish the de facto industry standard for infotainment systems.”

The company gets more than half of its $5.3 billion in annual revenue providing navigation systems and infotainment features, and the added software capabilities will accelerate growth in those areas, Paliwal said in a statement. The two purchases are intended to add another service-focused segment at the maker of Harman Kardon and JBL stereo equipment.

Under the Symphony Teleca agreement, Harman will pay $382 million in cash and $166 million in stock at the close, with the remaining $232 million to be paid in 2016. The Stamford, Connecticut-based audio company will pay $99 million in stock and $71 million in cash for Red Bend.

Harman rose 0.1 percent to $98.88 at the close in New York. The shares gained 30 percent last year.

Bigger Purchases

Today’s purchases contrast with smaller bolt-on acquisitions Paliwal has made since taking the CEO job in 2008.

“Hard negotiations” with Mountain View, California-based Symphony Teleca began six months ago, though the two companies were partners before and had “known each other’s management well,” Paliwal said in an interview. The Red Bend discussions started three months ago, and the shorter time in reaching a deal was a result of its “exuberance” to join a larger company, he said.

Harman plans to maintain staffing from Symphony and Waltham, Massachusetts-based Red Bend of more than 8,000 engineers worldwide, as well put the CEOs of the two acquired companies in jobs that would report directly to Paliwal.

Chief Financial Officer Sandra Rowland said on the call that the acquisition won’t change Harman’s stock buyback plan. The company’s board in October authorized share repurchases of as much as $500 million over three years.

As the auto industry increases the integration of connected technology into its vehicles, Harman expects to compete as well as collaborate with BlackBerry Ltd.’s QNX software system, which is already embedded in millions of cars and trucks.

The Red Bend acquisition gives Harman the ability to focus on automotive cybersecurity, Paliwal said.

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