LogMeIn is dialing down its ambitions in the Internet of Things space.
More than four years after LogMeIn's now-former CEO said that the Internet of Things could become its largest business, the Boston-based company on Thursday announced that it had sold Xively, its IoT connectivity platform, to Google for $50 million.
While the company is divesting its core IoT product, LogMeIn has indicated it still has a role, albeit perhaps a smaller one, to play in the IoT ecosystem.
“So the obvious question is, does this mean LogMeIn is exiting the IoT? Well, if you mean the IoT connectivity platform space, yes, we’re leaving it," the company said. "We believe that Google Cloud, now armed with Xively’s team and great technology – and backed by their platform and developer heritage and reach – are a far better fit for the future of platform leadership."
"What we will continue to do is invest in our Support-of-Things initiatives for products like LogMeIn Rescue, Bold360, GoToAssist, Central, Rescue Lens and SeeIt – all offerings that will continue to help our customers support new types of connected products, as well as the connected consumers that use them," the company continued.
"From a strategic perspective, post-merger, Xively, as an IoT platform, really was no longer strategic."
It's a major change in direction from when LogMeIn acquired Xively, which was known as Pachube at the time, for $15 million in 2011. (Two years later, the company acquired a Boston startup called Ionia for $12 million to further expand its IoT offerings.)
In a 2013 interview, Michael Simon, who was LogMeIn's CEO from 2003 to 2015, predicted that Xively would become a majority of LogMeIn's business by 2020.
"People are estimating this to be, by the end of the decade, something to the tune of a $1 trillion market — which would make it the largest technology market opportunity of all time," he told Boston Business Journal at the time.
Xively is a cloud management software platform for connected devices, ranging from smart cat doors to connected shower valves to help hotels monitor water usage. With Xively, companies can get insights into things like how many products are activated, how they are being used and how often they are experiencing issues.
LogMeIn's bullishness on Xively reached its peak in 2015, at least in the public eye, when the company held Xively Xperience, a two-day, splashy conference at the Seaport Hotel where the company hosted talks by tech heavyweights Ray Kurzweil and Peter Diamandis, as well as a stand-up routine by comedian T.J. Miller.
Despite the company's investment, however, Xively's business didn't appear to grow at the pace Simon was originally hoping for. In an earnings call for the fourth quarter of fiscal year 2015, Bill Wagner, who became CEO that year, said the company's Internet of Things business was "still a pretty immaterial part of the business." However, he added, he believed the long-term success of the business would "justify the hype."
In the end, Xively did not pan out for LogMeIn in the way the company originally planned. In the 2017 fiscal year, Xively only brought in $3 million in revenue, a tiny fraction of the company's more than $1 billion in non-GAAP revenue last year, according to LogMeIn's earnings call on Thursday. The 47 employees who are joining Google as part of the Xively acquisition is roughly half of the Xively team size from a few years ago.
So why did the company decide to give up on Xively? Beyond slow revenue growth, it appears that the Internet of Things ended up not playing a bigger role in the company's overall strategy after it merged with Citrix's GoTo business last year.
"From a strategic perspective, post-merger, Xively, as an IoT platform, really was no longer strategic," LogMeIn CFO Ed Herdiech said in a Q&A session with analysts on Thursday's earnings call. "That platform as a service play for us wasn’t going to be part of our go-forward strategy, once we had a chance to work through the merger. So, part of our job as operators is to be good stewards of capital, and I think this is a good example of that."
Mergers and acquisitions have been a big part of LogMeIn's strategy in introducing new products and gaining market share. Just last week, the company announced that it would acquire Jive Communications, a provider of cloud-based phone systems, for $342 million to bolster the company's remote collaboration and connectivity tools.
But as Xively illustrates, M&A deals don't always work out as planned.
