Cutting Edge Software, developer of the popular QuickOffice suite for Palm OS handhelds, has been acquired by Mobility Electronics.

The Nasdaq-listed company manufacturers a range of mobility products, including its recently announced Pitch presentations solution for Palm m500 series handhelds. It hopes to combine QuickOffice’s word processing, charting, spreadsheet and group collaboration capabilities with Pitch and market the bundled solution through its strong retail channels. Cutting Edge Software, which is privately held, has been profitable for some time and reported around $400,000 in revenue for the last quarter. Mobility will pay $3m in cash and shares for the company.

“This transaction reflects our continued efforts to increase our presence in the rapidly growing handheld computing device market, and firmly positions us to be a leader in providing solutions for the emerging combination cell phone/PDA device category,” said Holmes Lundt, Executive Vice President of Mobility Electronics’ handheld computing device business line. “Even excluding the incremental growth we expect to generate through the combination of our two companies, Cutting Edge Software’s current level of revenue and earnings alone makes this transaction beneficial for our stockholders. Once the additional opportunities that we believe are available to us are factored in, this transaction has significant upside and gives us even greater confidence in our growth expectations for the second half of 2002 and beyond.” Jeff Musa, Founder and President of Cutting Edge Software, Inc., added: “We are extremely pleased to join forces with a rapidly emerging company like Mobility that can help advance our unique product line. We believe that the continued proliferation of PDAs as well as the emergence of hybrid cell phone/PDA devices serves as a strong catalyst for increasing the demand for our software suite and the Mobility products that will feature it. Mobility’s distribution channels will help us reach markets that were previously untapped, and we look forward to generating significant growth in our product line and Mobility’s other innovative handheld solutions.”

Insight

Cutting Edge Software was the first company to deliver a fully-fledged spreadsheet application for Palm OS back in 1997. It has retained a reputation as a leading innovator and its suite of office applications remains the benchmark for power users of Palm handhelds, despite the wider distribution enjoyed by its competitor DataViz.

Combining QuickOffice with Pitch makes sense, although there is likely to be a limited market for the bulky hardware accessory in its first version. The real benefit of the acquisition is combining two complimentary distribution channels – Cutting Edge has always been strong in direct sales and has an established customer base of Palm office application users. In contrast, Mobility Electronics has access to retail outlets throughout the US.

This also provides a rare glimpse into the financial opportunity for Palm OS developers. The vast majority of applications are produced by private companies and individuals, meaning it is rare to see any sales figures. Cutting Edge is one of the leading developers in the industry and says it had revenues of around $400,000 in the last quarter. The company has extremely high margins and relatively low headcount, demonstrating that even individual programmers should be able to make a healthy living if they can develop a suitably popular application.