Apple Close to Completing $345M USD Purchase of Israeli Kinect Sensor Maker

After seeing some initial investors sell their shares and step off at the $250M USD valuation mark, Israeli sensor startup PrimeSense is mulling whether to except a modestly higher valuation to be acquired or whether it should continue to grow independently.

In July, Calcalist, an Israeli newspaper, reported that Apple, Inc. (AAPL) was interested in acquiriing the Israeli firm, which is best known for manufacturing the digital brains of Microsoft Corp.’s (MSFT) Kinect Xbox sensor.

PrimeSense has developed a unique set of firmware and hardware which takes video streams from multiple cameras and blends it together into a 3D spatial map.  Its CMOS sensor detects the image, while the aforementioned processing occurs onboard PrimeSense’s proprietary system-on-a-chip dubbed “Carmine”.  The resulting sensor can “see” color, depth, and motion in 3 dimensions, allowing unique user interfaces.    
This year PrimeSense announced the mobile-geared Capri (PS1200) which replaces the bulkier Carmine (PS1080, pictured) image sensor, used in the Xbox. [Image Source: PrimeSense]
PrimeSense’s investors include Canaan Partners, Silver Lake Sumeru, Gemini Israel Funds, and Genesis Partners.  Canaan, Gemini Israel, and Genesis reportedly pushed $30M USD in PrimeSense between 2005 and 2011.  Then in 2011 Silver Lake became the biggest institutional investor yet, pushing an additional $50M USD into the growing firm.

The recent share sale’s $250M USD valuation isn’t that far below the $345M USD that Apple reportedly offered.  And that has some investors hesitant, as they were hoping for a higher bid.

Apple may close a bid for the Israeli sensormaker this week. [Image Source: Microsoft]
Still a new report by the Calcalist claims that investors are leaning towards accepting Apple’s bid, which is in the “final stages” of consideration.  One source close to the owners called the Apple offer “a bit of a letdown, but a decent outcome.”  Another said that Apple’s bid was “the best that could happen, given the circumstances: A big strategic buyer at a decent price.”

It’s unclear how the acquisition, which could reportedly be made official by the end of the week, would affect the Kinect business.  It is clear where Apple’s interests primarily lie — in the company’s latest 3D sensors, which are geared at mobile devices.  This new sensor, dubbed Capri 1.25 was unveiled at CES 2013.

Capri is small enough to squeeze into smartphones and tablets. [Image Source: PrimeSense]
In addition to mobile potential, purchasing PrimeSense could prove helpful to Apple’s rumored Smart TV ambitions.  Apple currently sells a set-top box (“Apple TV”), but does not sell a television set with a system-on-a-chip onboard.

Apple historically has primarily acquired smaller firms and in particular has targeted small hardware and user intereface technology firms, which it considers undervalued.  Many of Apple’s “inventions” come courtesy of these acquisitions; for example Apple acquired FingerWorks, a startup by University of Delaware Professors John Elias and Wayne Westerman.  FingerWorks provided the technology behind Apple’s multi-touch, a feature that has since become ubiquitous on the market and is today a focal point in Apple’s efforts to ban devices running Google Inc.’s (GOOG) Android operating system, which it says “stole” multitouch.

The U.S. gadgetmaker is also no stranger to investment in Israel, having purchased Anobit, an Israeli flash memory controller chipmaker in January 2012 for $390M USD.

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