IT Industry News – August 2015

August 2015 was an exceptionally slow month in the M&A space; however, there were two billion dollar deals. Symantec sold Veritas (which it paid $13.5 billion dollars for 10 years ago) to a group of investors for $8 billion. IBM also paid "big bucks", shelling out $1 billion for Merge Healthcare. A small deal saw Calgary-based Above Security bought by Hitachi; Transcomos bought 30% of Vietnamese daily deals site Hotdeal; Freshdesk bought live-chat company 1Click; and PLDT bought ecommerce startup Paywhere.

Other companies in the news were HTC for laying off 2,250 people and Lenovo who laid off 3,200 people. Both companies have been struggling in the hyper-competitive smartphone space.

On the economic front, there is much debate about Canada’s latest "recession" following reports of two consecutive quarters of negative GDP growth. Certainly the West is suffering because of the price of oil; however, Canada is still adding jobs and consumers are spending. There is no panic, but it certainly isn’t the US, which seems to be going from strength to strength. Almost every indicator there was positive again this month, and another 185,000 jobs added! (Note: By the time you read this the August figures may have been released, so bear in mind this update is based on July numbers released in August.)

In this Issue:

> General Interest
> Company News
> Merger & Acquisition Activity
> Primary Sources


> GENERAL INTEREST

General

TrendForce is predicting that shipments of tablets will fall by about 15% this year to 163 million units, as once-popular 7-inch mini-tablets are displaced by 6-inch smartphones or phablets. But it’s not all bad news. TrendForce is also predicting that shipments of large tablets such as Microsoft’s Surface Pro range and Apple’s forthcoming 12.9-inch iPad Pro will grow as usage extends from entertainment to business, from content consumption to creation.

The job indicators in Canada

Canada added 6,600 jobs in July from June, according to seasonally adjusted numbers released by Statistics Canada. The unemployment rate remained at 6.8% for the sixth consecutive month.

The Canadian staffing index, a measure of staffing activity in Canada, rose to a reading of 108 in July, up from an index value of 103 in June. However, the index fell 5% year-over-year from a reading of 113 in July 2015. The index value of 100 corresponds to the size of the industry in July 2008, when the index began.

The job indicators in the US

The Institute for Supply Management’s purchasing managers index for US manufacturing decelerated to a reading of 52.7 in July, down from June’s reading of 53.5. The reading indicates continued expansion, but at a slower pace.

The outlook among American workers as measured by Randstad’s US employee confidence index edged down in the second quarter but remains exceptionally high, with 2015 marking the first year the US employee confidence index has reached 60.0 points or higher since the survey’s inception in 2004. The index fell slightly to a reading of 61.9 in the second quarter from a record-high 62.3 in the first quarter.

US private sector employment rose by approximately 185,000 jobs in July from June, according to the ADP national employment report. Large businesses with more than 500 employees posted their strongest job gains since last December and almost doubled the June number

Economic activity in the US nonmanufacturing sector accelerated in July to an all-time high. The Institute for Supply Management’s nonmanufacturing composite index reached 60.3, since the start of the composite index in 2008.

Construction employment in July totaled 6.38 million in July, the highest level since February 2009, according to an analysis of US Department of Labor data released today by the Associated General Contractors of America. The number of unemployed workers with construction experience also shrank to a 14-year low, and Associated General Contractors officials cautioned that the diminishing pool of available qualified labour may be having an impact on the industry’s ability to meet growing demand.

The Conference Board’s US employment trends index rose in July to a reading of 127.89 from June’s downwardly revised reading of 127.57. The July reading is up 4.4% from the same month a year ago

The Conference Board’s US leading economic index fell 0.2% in July to a reading of 123.3 (2010 = 100), following increases of 0.6% in both June and May. According to the Conference Board, the index is still pointing to moderate economic growth through the remainder of the year.

The US information technology industry added 70,500 jobs in the first half of 2015 for a total of almost 5.0 million jobs, according to an IT employment midyear update report released by CompTIA.

The Conference Board’s consumer confidence index for the US rose in August to a reading of 101.5 (1985=100), up from a July reading of 91.0. The Conference Board said that consumer confidence rebounded in August, following a sharp decline in July and consumers are once again feeling optimistic about the near future.

The American Staffing Association’s index measuring employment in the US staffing industry for the week of August 10 to August 16 rose 1.00% compared to the previous week, but was down 1.99% compared with the same week last year. The index value fell to 98.32.

The Randstad manufacturing and logistics employee confidence index rose to 60.8 in mid-year 2015 from 55.9 at the end of 2014, This is the second consecutive wave of growth among this group, which was 53.3 one year ago. Index values above 50 indicate a positive reading. The percentage of workers in the sector who believe there are more jobs available rose to 37% from 28% reported at the end of last year.  

Randstad’s US finance and accounting workers’ confidence index rose sharply to 67.2 in mid-year 2015, up 8.3 points from year-end 2014, according to the Randstad Professionals’ finance and accounting employee confidence index. The index remained above 50, which indicates a positive reading.

US real GDP rose in the second quarter at an annual rate of 3.7%, according to a second estimate that revises an earlier, advance estimate of 2.3%, the US Bureau of Economic Analysis reported. The new estimate beat economists’ forecasts and was a bigger improvement over the anemic first quarter.

The survey of hiring trends in IT for the first half of 2015, entitled IT Employment Midyear Update, shows the addition of more than 70,000 jobs, citing the US Bureau of Labor Statistics. CompTIA tracks both the technical positions in the IT industry as well as supporting positions like sales, marketing, and human resources. It also tracks technical workers who are employed across every other industry sector of the economy. The survey shows that 14 of the past 18 months have seen job gains, with a particular spike in April 2015. Unemployment in IT also sits below the national average, which is 3.4% compared to 5.3%, nationally.

The job indicators in Mexico

Improvements in the six-month change in Mexico’s leading economic index and the country’s coincident economic index suggest Mexico’s economic expansion will continue, according to The Conference Board. However, its rate of expansion is unlikely to pick up sharply for the remainder of this year.


> COMPANY NEWS

Earlier this month, Taiwan-based HTC posted a second-quarter loss of $252 million against revenues of just over $1 billion. HTC sells its own smartphones and also makes handsets for a number of leading US companies, including Google’s Nexus One. However, lower sales in China, coupled with competition from the likes of Apple’s iPhone and Samsung, have played havoc with HTC’s plans. Although known for lower-end handsets, the company has tried to branch out into the higher-end market — one that is dominated by the iPhone. With this as the backdrop, HTC announced that it will cut 15% of its workforce and slash operating expenses by more than a third. This translates to about 2,250 people cut by the end of this year.

Lenovo is facing pressure in the smartphone market in addition to slow sales of PCs. According to the company’s financial results for its fiscal first quarter, Lenovo reported a 51% slump. The company announced it will be slashing about 10% of its non-manufacturing jobs, or about 3,200 employees. That equals about 5% of its total workforce. The company will also incur restructuring costs of approximately $600 million and additional spending to clear smartphone inventory of approximately $300 million.


> MERGER & ACQUISITION ACTIVITY

After months of seeking buyers, Symantec announced it is selling Veritas to a group of investment firms for $8 billion in cash. The investors are led by the Carlyle Group, followed by GIC Private Limited, a sovereign wealth fund established by the government of Singapore, and other expected co-investors. Bloomberg had reported in July that Symantec was nearing a deal with Carlyle Group, although the price offered for the information management business hovered between $7 billion and $8 billion at the time. According to its report, it had already been shopping for potential buyers for several months, but interest was limited due to a tax burden that would result from the split. Since purchasing Veritas in 2005 for $13.5 billion (the second most expensive software acquisition of all time), Symantec has done little to integrate or grow the information management business, resulting in low revenue growth.

Software vendor Hitachi Systems, Ltd., has announced the acquisition of a Canadian security service provider Above Security. The managed security service provider, which has security operations centres (SOC) in Winnipeg, Montreal, Switzerland and one set to open in Mexico, will see its brand, executive and management teams left intact. After Above’s own acquisition of fellow MSSP Seccuris back in February, it began scouting potential partnerships with underlying conditions that it would remain a separate entity. Over the course of the transition, to be finalized in October, Hitachi will begin marketing Above’s ArkAngel security platform in Japan, while the Canadian company will add "A Hitachi Group Company" to its name, and add Hitachi technologies to its portfolio, as well as related "synergies."

IBM will purchase Merge Healthcare for $1 billion in a move that will enable its Watson cognitive computing system the ability to see medical images. Merge’s platform is used to handle and process medical images at more than 7,500 healthcare sites. The company also has clinical systems. For Big Blue, the acquisition highlights how healthcare is the most important industry for commercializing Watson. IBM is hoping to take Watson’s image analytics and combine them with Merge’s medical management platform. The company could combine Watson’s cloud applications to give electronic health records more intelligence. Merge’s technology is used in radiology, cardiology, orthopedics, eye care and other healthcare specialties. With images added to Watson, the system should be able to see more patterns and help radiologists interpret results. IBM wants to cross reference medical images with lab results, genetic testing and other data. IBM has previously acquired Phytel and Explorys and wrapped them in the Watson Health unit, which launched in April.

AlienVault has raised $52 million in a fresh round of funding, bringing total investment to roughly $116 million. The cybersecurity firm said the Series E funding round was led by new investor Institutional Venture Partners (IVP), also included existing investors Trident Capital, Kleiner Perkins Caufield & Byers and GGV Capital. AlienVault plans to use the funding to improve the scale of the firm’s global sales strategy and to push additional investment in AlienVault’s Unified Security Management (USM) platform.

Japan-based outsourcing giant Transcosmos has acquired 30% of Vietnamese daily deals site Hotdeal for an undisclosed sum. Transcosmos says the deal allows it to pass on its ecommerce know-how to Hotdeal and offer the products and services of its clients in Japan to consumers in Vietnam. Following the transaction, Hotdeal’s operations will merge with those of Transcosmos in line with their goals to expand in the ASEAN region. Launched in December 2010, Hotdeal claims to operate the largest daily deals site in Vietnam, with 3.1 million unique monthly users and about 2.5 million members. It also owns travel site Yesgo.  The Vietnamese startup is the latest ecommerce company to join Transcosmos’ portfolio after Philippine daily deals site Metrodeal, Thai ebook firm Ookbee, Singapore cosmetics ecommerce shop Luxola, and Indonesian fashion ecommerce business Berrybenka. Transcosmos is principally engaged in outsourcing. It provides call center, business process outsourcing, and digital marketing services, including inbound and outbound, fulfillment, support desk, web integration, marketing research, and more. In 2014, it expanded its services to specifically cater to the ecommerce industry, providing end-to-end ecommerce solutions.

Google Capital-backed Freshdesk announced its first acquisition: Bangalore-based 1Click, whose software enables live video chat and co-browsing. These features will now become a part of Freshdesk’s software to enhance its capacity for customer interactivity. "The acquisition of 1Click shows our commitment to evolving our products to enable brands to interact seamlessly with their customers across any channel – social, mobile, or chat". The acquisition of 1Click comes months after Freshdesk closed a US$50 million series E round of funding. It continues to grow its global customer base which has now crossed the 50,000 mark. The company says it is exploring more acquisitions to add complementary technologies and capabilities to Freshdesk’s SaaS (software-as-a-service) products.

Philippine telecommunications firm PLDT, through unit Voyager Innovations, bought Singapore-based ecommerce startup Paywhere for US$5 million. Paywhere is the company behind TackThis, a cloud-based ecommerce platform that operates on a software-as-a-service model. It enables entrepreneurs and businesses to set up their own online stores in just a few steps, manage their inventory, and accept payments through a variety of local providers. With 30,000 registered users across Southeast Asia, TackThis allows merchants to easily integrate their stores with social media sites like Facebook, as well as blog sites such as Tumblr and Blogspot, or personal blogs. TackThis also runs a concierge service for small and medium enterprises (SMEs) in the Philippines. The concierge service covers online store creation, inventory and logistics management, payments, and customer service. TackThis is complemented by another Paywhere platform Takatack, which aggregates products from various ecommerce sites into a single shopping destination.


> PRIMARY SOURCES:

IT World Canada – http://www.itworldcanada.com/
TechRepublic –  http://www.techrepublic.com/
ZDNet – http://www.zdnet.com/
Information Week – http://www.informationweek.com/
Staffing Industry Analysts – http://www.staffingindustry.com/