In order to beef up its mobile offerings which includes
Shutterfly iPhone and iPad apps as well as the soon-to-be-released
Treat birthday card app,
) recently took over Penguin Digital, a mobile application
developing company. The purchase consideration of the deal was not
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Penguin Digital launched an iPhone app in January, 2012 called
Mobile Photo (MoPho) Factory. This app allows users to access their
photos from iPhones or Facebook or Instagram accounts and create
customized products and gifts while on the move. The MoPho
application will be rebranded and improved over the next few months
and will eventually join Shutterfly's existing mobile offerings.
Furthermore, Penguin Digital also developed a Software Development
Kit (SDK), which allows other developers to print photos as well as
create photo based products through their applications.
We view the recent deal as strategically positive for both parties.
Penguin Digital, which was founded in 2011, will be able to operate
at a greater scale and access a larger customer base. On the other
hand, Shutterfly, which offers photo-related services, will be able
to enhance its mobile strategy. The latest acquisition will further
affirm Shutterfly's market leading position in the growing mobile
With customers becoming more tech-savvy, smartphones and tablets
have become the order of the day. According to market research
group eMarketer, more than half the mobile phone users in the U.S.
are believed to be shifting to smartphones by 2013.
Shutterfly is currently focused on growing its business through
strategic partnerships with retailers and acquisitions. This year,
Shutterfly had already signed two acquisition agreements to get
hold of Israel-based photo software company Photoccino and the
Kodak Gallery. A year ago, this leading Internet-based social
expression and personal publishing services company took over a
privately-held card design company Tiny Prints.
In the second quarter of 2010, the company entered into an
agreement with Sony to give customers instant access to
Shutterfly's Simple Path Photo Books on new Sony Vaio computers.
The company is also in a tie-up with Target Corp. (TGT), a leading
discount retailer in the United States. Additionally, the company
acquired Nexo in 2008 and TinyPictures in September 2009.
We believe such strategic acquisitions augur well for Shutterfly.
The company's competitors include
) as well as the Photoworks and Webshots brands of
American Greetings Corp.
). These companies offer certain services similar to those of
Shutterfly and in some cases at lower price points.
Shutterfly currently carries a Zacks #3 Rank, which translates into
a short-term Hold rating. We are also maintaining our long-term
Neutral recommendation on the stock.