(HAR) Harman Buys iOnRoad

Harman (HAR) recently announced that it has acquired Israel-based iOnRoad Technologies, a developer of vehicle safety software. However, Harman did not provide any monetary details of the transaction.

iOnRoad develops software for Advanced Driver Assistance Systems (“ADAS”), which run on any platform including Apple’s (AAPL) iOS, Google’s (GOOG) Android, Microsoft’s (MSFT) Windows as well as on open systems such as Linux.

The iOnRoad app is quite popular  with vehicle owners as more than a million users have already downloaded  it through Google Play and Apple iTunes. Harman said that it will continue to sell the app through both these platforms going forward.

iOnRoad is Harman’s second acquisition for its Infotainment segment. Earlier, in Aug 2012, the company acquired Bangalore, India-based Interchain Solution, which offers products and technology solutions for automotive infotainment and telematics.

The iOnRoad acquisition is expected to bolster Harman’s position in the Infotainment systems and services market. The iOnRoad acquisition will not only expand Harman’s product portfolio but will also boost its Infotainment segment’s top line in the near term.

In the second quarter of 2013, Infotainment revenues decreased 10.0% year over year and 3.7% sequentially to $540.0 million. The decline reflected lower automotive production volumes in Europe, primarily due to weak demand.

To drive growth, Harman announced a new division called Infotainment services that will serve its customer base of 15 million. The division will offer fourth generation long-term evolution (“4G/LTE”) technologies to vehicles currently on road, cloud-based services to cars and customer relationship management services.

We believe that Harman’s new manufacturing capacities, growing product pipeline, solid patent portfolio, new awards as well as launch of new products will boost its top line and profitability over the long term.

However, tough competition and sluggish macroeconomic environment particularly in Europe may hurt its profitability in the near term.

Currently, Harman has a Zacks Rank #3 (Hold).

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