Bsquare Founder Bill Baxter Comments on TestQuest Acquisition—Sees Marginal Benefit

11/20/08Follow @gthuang

This morning, there was news about Bellevue, WA-based Bsquare buying the assets of TestQuest, a Minneapolis, MN-based mobile software firm, for $2.2 million. It made me think about the strategy behind the deal, and whether it signifies a shift in Bsquare’s business.

So I pinged Bill Baxter, who founded Bsquare as CEO in 1994 and took it public in 1999. Baxter, who left the company in 2004, is now chief technology officer of Seattle-based Cozi (and an Xconomist). He sent me the following insights about the direction of Bsquare (NASDAQ: BSQR) and the significance of today’s deal, in an e-mail:

“The original plan for taking the company public was to focus on increasing the IP portfolio to increase the value per engagement with OEMs [original equipment manufacturers]. We invested heavily in that strategy during the downturn and developed a number of valuable assets. Those assets were to be deployed with our services which included design, development and testing of embedded devices (mobile phones, set-top boxes, etc.). We developed a product called CEValidator which was used to assist us in performing QA [quality assurance] services and then we’d license that product to OEMs at the end of the service engagement, along with other IP.

Having said all that, my departure from the company in 2004 reflected a fundamental change away from that strategy to focus more on the core service business. BSQUARE cut investment in IP and the bulk of revenue shifted towards a service business.

The acquisition of TestQuest (discussions about which started before my departure) is reflective of a continuing focus on delivering testing services. TestQuest offers two things:

1. New technology to automate testing of mobile devices.

2. An existing customer base.

Overall, the investment is not a huge thing for the company. They now have a new office to manage with little or no critical mass. But it was cheap and offers them some benefit. I don’t see how they can sustain the site in Minneapolis. But I do see how they might benefit marginally. It will not change the business in such a way that would make them a more attractive public company. But it should be accretive to the business if they can contain the costs.”

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com or call him at 617-252-7323. Follow @gthuang

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  • Roger D.

    It would be good if the TestQuest product was any good. I used to be a customer of the company’s previous product but when they tried to push their new product Countdown the company went into a tailspin. Very poor product quality, unbelieveably slow, and no support. It won’t be long before this POS is written off. There are few customers left otherwise why would they sell 4.8M of sales for 2.2M? Seems to me that this is a dead man walking.

  • looter scibby

    True. CountDown was a good concept but total crap architecture performance and quality was one of the worse i have seen. We tried to use this on an WinCE device that we had built. We were set back months when it didnt perform as advertised. I cant see how this is going to work for BSQR. Not without reengineering the product. And who wants to go to Minnesota?

  • Burned by Hahn

    Testquest leaves behind a bloody trail of unpaid bills. Crappy product or not. Martin Hahn burned through a lot of money over many years with nothin to show for it. BSQUARE might be able to get some return on a small investment and get their money back at least.

  • http://blog.lakehome.com Baxter Home in Mn

    Very good concept. I will be interested in follow-ups.