Shares gained $1.54, or 20 percent, to $9.25.

JPMorgan analyst Lauren Ye said the deal will push the Aliso Viejo, Calif.-based company into a leadership position within the connectivity sector. She kept her "Overweight" or "Buy" rating on the shares.

"We view this as a positive transaction helping to diversify Smith Micro Software's customer base," Ye said in a client note, adding that it could fuel 40 percent revenue growth in 2008.

The acquisition eliminates one of Smith's biggest competitors, and brings it six major customers, including Cingular and T-Mobile USA. "This acquisition also helps to get a foot in the door which is often difficult and creates opportunity to cross sell other products," Ye said.

Also, the deal helps Smith expand its sales base. Currently, Verizon makes up more than 70 percent of revenue, and the deal should bring that below 60 percent, Ye said.

"The company's strategy is to diversify and expand through more products and grow internationally," she said.

The deal should close in January and add a penny to 2008 earnings, Ye said, noting she does not expect any regulatory obstacles to the deal.