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

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 Editor of Xconomy Boston. E-mail him at gthuang [at] Follow @gthuang

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