Why It May Be Time to Buy Skyhook

The news that Skyhook's triangulation data had been replaced on iOS 4 with Apple's own proprietary system is seemingly very bad for Skyhook Wireless. Apple was the company's sexiest and most visible client. I confirmed that had happened last week with founder Ted Morgan.

Here's how the WSJ presented the news this morning:

Beginning with iPhone operating system version 3.2, which was released in April, Apple began using its own proprietary database of WiFi access points to help determine the location of a mobile device. Apple disclosed the change in a July 12 letter to U.S. Rep. Edward Markey and Rep. Joe Barton. The congressmen had asked Apple to explain its privacy policy after the computer maker alerted users in June that it would be collecting location data in order to provide location-based services . . .

The move is a blow to Skyhook, a startup that helped pioneer the practice of mapping WiFi networks to determine location. In 2008, Apple tapped Skyhook to provide WiFi-based location services for the new iPhone and iPod Touch. In the same letter to Congress, Apple also said it has stopped using Google for location data.

But this is also a moment of opportunity for Skyhook and the time may be ripe for an acquisition by a third party. Skyhook arguably has the best location database in the market -- Morgan says so and believes it. It's undoubtedly better than Apple's new system and better than Google/Android (for sure).

Skyhook has raised (by my count) just under $17 million in funding and so would not be terribly expensive for an Apple, a Google, a Nokia, a Samsung or a Microsoft to pick up, given the strategic nature of location on mobile devices. Skyhook's challenge, however, may be the perception that its database can be replicated or recreated with sufficient time and effort. 

Apple is perhaps unlikely to make the Skyhook acquisition given the recent development, so perhaps Google or Microsoft should step up and buy the company. Google would certainly benefit immediately from Skyhook's assets and creativity around location products. I'm not sure Skyhook CEO Morgan would like to be a Google employee but perhaps if the price were right . . .

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Update: Another reason to buy the company is that it has 15 patents around location and locaton detection.