Apple's Authentec Buy Hints At Secure iPad

$356 million acquisition of biometrics specialist suggests Apple might be getting serious about the enterprise client market.
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Apple has agreed to acquire security hardware and software maker Authentec for $356 million in a deal that could pave the way for development of iPads and iPhones with built-in biometric authentication features.

The deal was not publicly announced by either company, but disclosed Thursday by Authentec in a filing with the Securities and Exchange Commission. According to the filing, Authentec will become a wholly-owned subsidiary of Apple, and will continue operations in Melbourne, Fla. under its current name.

Authentec is known mostly for its fingerprint readers, which are built into or added onto computing devices in commercial and government use. It also offers a product for home use, called TrueSuite, that lets consumers log into online accounts like Facebook and Twitter through fingerprint authentication.

[ Apple's first-ever security presentation at the Black Hat conference underwhelmed attendees. Read more at Apple Black Hat Debut Disappoints Hackers. ]

Apple has not publicly commented on the deal, but it's clear from the SEC filings that it will be counting on Authentec to build hi-tech authentication features for products like the iPad and iPhone, as well as for the Mac. The filings include a copy of a development agreement under which Authentec will perform contract work for Apple. The agreement states that "all right, title and interest in and to all Project Work Product and all Intellectual Property Rights therein or thereto, will be the sole property of Apple."

When performing work for Apple, Authentec employees will have to adhere to Cupertino's legendary policies around security and confidentiality. "Upon completion of the services, project materials will be returned to Apple or destroyed at Apple's sole discretion," the agreement states.

The SEC filings also revealed that Apple and Authentec had an interim development agreement in place that dates back to earlier this year.

The deal could help Apple become a bigger player in the enterprise client market, as strong, built-in security tools would make the iPad and iPhone an easier sell to IT administrators and security pros. "By acquiring the company, Apple is basically going after the security portfolio," William Blair & Co. analyst Anil Doradla told Bloomberg.

The acquisition would also give Apple numerous patents for mobile security held by Authentec. Apple could use those to develop new products, or as a weapon against competitors in the tech industry's ongoing patent wars. Authentec's current customers include Apple rival Samsung.

Authentec isn't alone in the market for iPad and iPhone-compatible biometric readers. A number of third parties, including Bio-key, have developed such systems. But they often require bulky external hardware. Authentec will presumably develop fingerprint scanners that will be built directly into Apple's mobile products. That could make them more suitable for use in highly regulated, security-conscious industries like healthcare and financial services.

The deal remains subject to shareholder approval and other closing conditions. Authentec shares were up 61%, to $8.16, in opening trading Friday on word of the deal. Apple shares were down .38%, to $572.70.

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