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MobileIron (MOBL +10%) is making a strong move today on a Bloomberg report that the company is exploring options including a potential sale. The article says no final decision has been made and the company could opt to remain independent.

MobileIron is a mobile cybersecurity company. Its platform validates the mobile device, establishes user context, verifies the network, and detects threats to ensure that only authorized users, devices, apps, and services can access business resources.

The recent increase in remote work due to the pandemic is a nice tailwind for mobile security companies like MOBL. However, we think a potential sale would make sense for MOBL for the following reasons:

• Cybersecurity is a highly competitive market and it's even more difficult for smaller companies like MOBL to compete.
• At the same time, MOBL has been transitioning to a subscription model and away from perpetual licenses.
• The benefit here is that subscription revenue is more recurring in nature and easier to predict.
• The problem is that this change in revenue recognition has hampered MOBL's top line growth as it's no longer getting those one-time bursts of revenue from perpetual licenses.
• In turn, this lack of top line growth, coupled with the fact that MOBL is not yet profitable (and not expected to be profitable on a full year basis through 2022) is keeping a lid on the stock price which makes it difficult to raise money via equity offerings. That's especially important for a company that's not yet profitable.

For all these reasons, we think a buyout presumably by a larger tech company would make sense. It makes sense for larger players to add bolt-on acquisitions to fill in areas perhaps where they are weak. The acquiring company would be able to instantly leverage MOBL's platform to its larger base of customers. A buyout would also be a nice exit for MOBL shareholders as the stock price has not moved much over the past year. While we are not sure what will happen with MOBL, we suspect we are going to see more consolidation within the cybersecurity space as there too many players.