Tiny Qwes.com in Tustin said Wednesday that it agreed to be acquired by a Massachusetts company for $58 million--the latest example of a young technology company striking it rich with the right idea at the right time.
Natural MicroSystems Corp., a Framingham-based maker of Internet-based telecommunication products, said it will pay 1.5 million shares of stock for Qwes.com., an 18-month-old company with no revenue. Natural MicroSystems' shares closed Wednesday at $38.63, up $2, on the Nasdaq market.
Natural MicroSystems plans to retain all 18 employees at Qwes.com, a research and development firm that created a promising line of hardware that helps companies control the flow of data, voice and video files across their computer networks.
The deal has been approved by the boards of both companies and probably will close this month.
Qwes.com executives and other employees own a majority of the Orange County firm, but the company declined to say how much employees will receive.
"We have all benefited financially from the deal," said Qwes.com co-founder Kent Lowell.
A group of angel investors from Southern California also owns a chunk of Qwes.com, Lowell said. He declined to identify the investors or disclose their stake in the company.
"We were just poised to expand, hire a sales force and launch our first product, when this deal came together," Lowell said. "It's been a very busy time."
The deal-a-minute craze has been sweeping through Silicon Valley for years, but Wednesday's announcement illustrates that the trend has also surfaced in Southern California, as fledgling high-tech companies with promising products, but little or no revenue, are snapped up for millions of dollars.
Earlier this month, search engine Ask Jeeves Inc. agreed to buy North Hollywood-based Net Effect Systems Inc. for $288.1 million in stock, adding a live help desk for confused Web surfers. Privately held Net Effect, which employs 50 people, was launched in 1997.
In October, Laguna Hills-based BeadleNet LLC, a tiny, privately held maker of Internet-based security and data-routing devices, was acquired by WatchGuard Technologies of Seattle for $8.25 million in cash and stock. BeadleNet, which has a staff of fewer than 20, was founded in January.
Qwes.com was founded in April 1998 by local technologists working in the field of Internet-protocol, or IP, networking. IP technology lets computers send so-called packets, or bundles, of phone calls, data transmissions and multimedia over one network.
But if too many of these packets are sent at the same time, the data can be delayed from getting where they need to go.
Qwes.com creates products that prioritize the information that travels across these Internet-based networks. For example, the computer can be told during times of heavy traffic to route telephone calls before spreadsheet data.
Demand for these and similar products is surging as more companies use the Internet.
One of the hottest industry trends is getting local and long-distance phone service over the Net, or voice communication over IP networks. Consumers and small businesses are expected to benefit the most, since it costs less to transport digitized voice in the form of packets than to use telephone circuits, and they often don't have the purchasing clout that large businesses do for telephone service.
Qwes.com's technology fits well with Natural MicroSystems, which makes products that streamline the transmission of multimedia presentations and phone calls across IP networks. The company's key customers for Internet-telephone products are communications equipment makers such as Lucent Technologies Inc. and Ericsson of Sweden.
Natural MicroSystems plans to keep Qwes.com's team in Tustin and at least double the staff within the next year, said Joel Hughes, vice president of business development with the Massachusetts firm. Qwes.com will become part of Natural MicroSystems once the deal closes, officials said.
The company also plans to launch Qwes.com's products by the first quarter of 2000, Hughes said.
The acquisition is expected to bolster Natural MicroSystems earnings in 2001, officials said. The company, which has about 400 employees worldwide, reported sales of $76.5 million in 1998.