Shutterfly Acquires Penguin Digital To Supplement Its iOS App Efforts

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Shutterfly (NASDAQ:SFLY) has acquired another start-up Penguin Digital Inc., a mobile application developer whose flagship product is an iPhone app called Mobile Photo Factory, or “MoPho” for short. Besides the application, the latter has developed a Software Development Kit (“SDK”) that lets other app developers integrate printing of photos and the creation of photo based products into their own applications. Shutterfly plans to rebrand and update the iPhone application over the next few months before adding it to its mobile offerings. It has no immediate plans for the SDK. The company competes primarily with services like HP’s (NYSE:HPQ) Snapfish, American Greetings’ Photoworks and Webshots brands, and Apple‘s (NASDAQ:AAPL) Cards app on iOS.

Check out our complete analysis of Shutterfly

New range of iOS apps to personalize merchandise on the go

The acquisition of Penguin Digital would help Shutterfly solidify its market leading position as it enables consumers to be more creative with their photos and preserve memories. The current array of iOS apps by the company only let users access, upload to and share their Shutterfly albums through email and social networks. The rebranded app will enable users to create physical prints and photo based merchandise such as iPhone & iPad cases, mugs, key chains, apparel, canvas prints and more. The users would be able to access their iPhone, Facebook or Instagram accounts to use their photos while using the services. The new app would be in line with company’s efforts to enable users access to their photo-printing, personalized merchandise business on the go. Another app called Treat aimed at the birthday card market is already in line for release.

With more than half of all the mobile phone users in the U.S. expected to own a smart-phone by 2013, [1] the company is well placed to engage the growing number of smart-phone users. We expect the new application will have a positive impact on the total number of users, the number of orders per user and the average price per order as the enhanced ubiquity of the service is bound to boost its popularity. The company already scores on the quality front as it has its own manufacturing units for the merchandise.

We have a $47 Trefis price estimate for Shutterfly, which is at a 40% premium to its market price. Personalized photos, cards and albums account for most of its value.

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Notes:
  1. US Mobile Usage Forecast: Midyear 2012 Update, eMarketer, September 2012 []