In the latest move by restaurant reservation giant OpenTable (NASDAQ:OPEN) to attract more diners as well as restaurant customers by focusing on mobile technology, the company announced this Monday that it has acquired Quickcue – a provider of guest management systems for restaurants.  This acquisition is the third by OpenTable this year, following Foodspotting in January (see OpenTable Looks To Boost Diner Growth With Foodspotting Acquisition) and JustChalo in June (see OpenTable Acquires JustChalo To Bolster Its Mobile Push). Given that all three deals are mobile-focused, it looks like OpenTable is doing everything it can to improve its mobile offerings. After all, mobile-based reservations already form a major chunk of OpenTable’s restaurant reservations, and strong growth prospects makes this avenue impossible to overlook in terms of long-term profitability.
The news should be encouraging to investors who fear that Apple (NASDAQ:AAPL) is set to join the list of big-ticket tech firms looking to move into the nascent restaurant reservation industry, after reports surfaced late last week that the company has filed a patent for a cloud-based application that handles restaurant ordering and reservations.  OpenTable’s shares fell nearly 4% on Monday as investors reacted negatively to the prospect of Apple becoming a direct competitor in the industry in the near future.
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We are in the process of updating our $70 price estimate for OpenTable’s stock, to factor in the impact of this latest acquisition.
Although OpenTable is the undisputed leader in the restaurant reservation industry, the company has stepped up its technology-related activities substantially in recent years to ensure that it maintains this strong position. Besides the series of tech-related acquisitions, OpenTable also completed an overhaul of its existing reservation software earlier this year.
A number of new competitors presenting themselves as low-cost alternatives, as well as the looming threat of new entrants, are largely responsible for this frantic activity from OpenTable, with the company being forced to look for ways to differentiate itself. This is where acquisitions like that of Quickcue figure in the bigger picture.
As a provider of diner management systems, Quickcue has about 40 restaurant customers using its proprietary mobile waitlist technology. Notably, the waitlist product offering is suited for primarily walk-in restaurants which also accept reservations. This is the segment OpenTable targets with its OpenTable Connect product. So we can expect the next version of OpenTable’s software to come integrated with Quickcue’s solution in the near future.
Coming to the impact of the acquisition on OpenTable, the most immediate effect will be a reduction in the company’s cash by $11.5 million – not really a problem as it reported about $103 million in cash & short-term investments at the end of Q3 2013. The 9-member Quickcue team will add to OpenTable’s existing employee base of just above 600. In return, the acquisition should help the company add more restaurants across North America to its customer base, and also boost growth figures for diners using its service. You can understand how an increase in diners helps the company’s share value by making changes to the chart below.Notes:
- OpenTable Acquires Quickcue, OpenTable Press Releases, Dec 17 2013 [↩]
- Apple Invents Restaurant Ordering & Reservation System, Patently Apple Website, Dec 12 2013 [↩]