IT Industry News – December 2015

December 2015 was not a busy M&A month but there was some interesting activity. The big deal saw Canadian telco Shaw make a big play into the cellular space with its proposed acquisition of Wind for $1.6 billion. Meanwhile, Rogers was also out shopping and growing its Maritimes presence through the acquisition of Internetworking Atlantic Inc. Other deals in December were not large but did feature some of the big players. Oracle bought Stackhouse, a cloud company with a specialization in "containers"; IBM boosted its video in the cloud capabilities with the purchase of Clearleap; and Microsoft picked up a mobile communications company, Talko. Other deals saw Ingram Micro buy the Odin Service Automation business from Parallels and, in the storage world, Carbonite bought Evault from Seagate.

Other companies in the news include the venerable Toshiba, which has been decimated following the financial scandals it suffered. It looks like layoffs might reach 10,000 as it undergoes a massive restructuring. Oracle announced an investment in Austin, Texas to build a campus attracting new grads and Samsung and Apple might have settled a five year patent dispute. An IDC report was bad news for Blackberry, as it forecasts that iOS, Android and Windows will be the top smartphone platforms for the foreseeable future.

On the economic front, the US economy shows no sign of slowing down, adding another 250,000 jobs in November. All of the indicators were positive, with four separate surveys indicating that companies were going to be growing their tech employee base in 2016. Canada, however, is another story, losing 35,700 jobs in November, albeit many of them temporary jobs associated with the election. The unemployment rate did edge up to 7.1% and while the third quarter saw GDP rise slightly after two quarters of contraction, the economy continues to sputter. Having said that, demand for professionals is increasing faster than supply and Canada is anticipating an increase in skills shortages.

IT Industry News - December 2015

In this Issue:

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


> GENERAL INTEREST

General

More than one-fifth of employees, 21%, plan to leave their current employers in 2016, according to a survey from CareerBuilder. This is an increase from 16% in last year’s survey. The survey also found 34% of employees are regularly searching for job opportunities, even though they’re currently employed, up from 30% last year.

Android, iOS, and Windows will continue to be the top three smartphone platforms over the next few years, says IDC, but Microsoft’s operating system will have just a fraction of the share enjoyed by its rivals. Platforms other than these three will all but disappear. People are buying smartphones at a slower pace now than they did just a year ago. In fact, 2015 will mark the first year of single-digit growth across the market with shipments of about 1.43 billion units, according to IDC’s predictions. That’s a growth rate of just 9.8%. IDC attributes the slowdown to China’s pancaking economy. Smartphone buyers in China snatched up handsets in record numbers of the last few years, but IDC says it believes China is already maturing into a replacement — and not a first-adopter — market.

The economy — Canada

Canada’s GDP rose 0.6% in the third quarter, following two consecutive quarterly declines, Statistics Canada reported. Expressed at an annualized rate, real GDP expanded 2.3% in the third quarter. By comparison, real GDP in the US rose 2.1%. Statistics Canada reported second-quarter GDP fell 0.3% on an annualized basis and first-quarter GDP contracted 0.7%.

Canada lost 35,700 jobs in November from October, according to seasonally adjusted numbers from Statistics Canada. The number of full-time jobs rose by 36,600 in November, but part-time jobs fell by 72,300. Compared to the same month a year ago, Canada was up by 124,000 jobs — an increase of 0.7% — in November, with all the growth in full-time work. Canada’s unemployment rate edged up to 7.1% in November from 7.0% in October.

The Canadian staffing index fell in November, continuing a trend of moderate year-over-year declines. The index, which measures staffing activity in Canada, fell to a reading of 108 in November, down from a reading of 111 in November 2014. The Association of Canadian Search, Employment and Staffing Services and Staffing Industry Analysts produce the index. It is based upon reported billed hours for temporary staffing from a survey of leading staffing firms.

CIOs in Canada face a hiring challenge in 2016, according to Hays Canada. The company published its 2016 Compensation, Benefits, Recruitment and Retention Guide, noting that 45% of IT managers expected permanent hiring of IT professionals to increase in their departments. Another 44% expected recruitment levels to remain the same. Also 72% of hiring IT managers said that the skills shortage affected their industry. The low value of the Canadian dollar is likely to contribute to the skills shortage because companies are increasing their presence in Canada.

The economy – US

A record 78% of US technology hiring managers expect to increase tech hiring in the first six months of 2016, and 71% of companies are looking to bolster their tech teams by 11% or more, according to job board Dice’s Tech Hiring Survey. The survey found 27% of respondents anticipate "substantially more" tech hiring in the first half of the year and 51% anticipate "slightly more" hiring. The ability to recruit skilled tech professionals has also become increasingly more difficult for companies as the demand and level of competitors has increased with 49% reporting the time to fill open positions has lengthened relative to last year.

Almost one-quarter, 22%, of US chief information officers plan to add staff to their IT departments in the first six months of 2016, according to the Robert Half Technology IT Hiring Forecast and Local Trend Report. 63% of CIOs plan to hire only for open IT roles, down from 67% with similar plans for the second half of 2015.

Half of business leaders expect moderate growth in 2016, according to a survey by Express Employment Professionals. Fewer predicted a decrease in business activity, while more predicted growth. 18% expect to be unchanged, and 16% expect strong growth. Overall a positive outlook! Only 13% expect a decrease.

Most US hiring managers expect to increase hiring in the next six months, according to the annual hiring survey by job board operator DHI Group Inc. The survey found 61% of hiring managers and recruiters in the US anticipate more hiring in the first half of 2016 as compared to the second half of 2015, a slight uptick of one point from a similar survey conducted a year ago. In the next six months, 17% of companies surveyed plan to hire 30% or more professionals, up five percentage points as compared to when asked in 2014.

The US Department of Labour revised its job count higher for November. Initially it was thought the US added 211,000 jobs. That number has been revised to 252,000 jobs added in November!

The US Federal Reserve increased the federal funds rate to a target range of 0.25% to 0.5%. It’s the first time in almost 10 years the board has raised interest rates.

The Conference Board’s US leading economic index rose 0.4% in November to a level of 124.6 (2010=100). November’s increase followed a 0.6% increase in October and no change in September. Although the six-month growth rate of the [leading economic index] has moderated, the economic outlook for the final quarter of the year and into the new year remains positive.

The American Staffing Association’s index measuring employment in the US staffing industry for the week of Dec. 7 to Dec. 13 rose 1.10% from the previous week. However, the index was down 3.95% from the same week last year. The index value was 103.29 and remained above an average of 100 for the third consecutive month.

US real GDP rose in the third quarter at an annual rate of 2.0%, according to the third estimate issued by the US Bureau of Economic Analysis. The new estimate revises an earlier, "second," estimate of 2.1%. GDP increased 3.9% in the second quarter. Bloomberg reports the estimate exceeded the median forecast of 1.9% in its survey of economists, noting growth was depressed by the most volatile components — inventories and trade.

Economic activity in the US nonmanufacturing sector increased in November but at a slower pace than October. The Institute for Supply Management’s nonmanufacturing composite index fell to a reading of 55.9 from October’s reading of 59.1. A reading above 50 indicates expansion in the sector. The employment portion of the index fell to a reading of 55.0 in November from October’s reading of 59.2 and indicates growth for the 21st consecutive month.

The US manufacturing sector contracted for the first time in 36 months in November, according to the Institute for Supply Management’s purchasing managers’ index for US manufacturing. The index fell to a reading of 48.6 in November, down from October’s reading of 50.1. Readings above 50.0 indicate expansion; however, the employment portion of the index rose to a reading of 51.3 in November from 47.6 in October, reflecting growing employment levels from October. The reading reached its highest reading since July and exceeded expectations of a reading of 48.4, according to Reuters.

The number of IT jobs in the US rose 0.2% in November from October to more than 5.0 million jobs, the TechServe Alliance reported. Year-over-year, IT jobs rose by 3.9% since November 2014, adding 187,300 IT workers. Engineering job growth edged up 0.1% in November from the previous month and 0.8% year-over-year, adding 20,500 engineering workers since November 2014 for a total of more than 2.5 million US engineering jobs.

The economy – Outside Canada and the U.S.

The Conference Board’s leading economic index for Mexico rose in October and September’s reading was revised to a gain. Despite the gain, however, the six-month change in the leading economic index remains negative with a slightly deeper contraction than decline over the previous six months. Additionally, the weaknesses among the leading indicators remained more widespread than the strengths in recent months. During the six-month span through October, the index fell 2.9%. All three components that comprise The Conference Board’s coincident economic index for Mexico — the number of people employed, industrial production and retail sales — rose in October.

Mexico’s employers report respectable hiring plans for the first quarter, according to a survey by ManpowerGroup Inc. The survey found 17% of employers in Mexico plan to increase staff in the upcoming quarter, 6% plan to make reductions and 75% expect no change, yielding a net employment outlook of 13% on a seasonally adjusted basis.


> COMPANY NEWS

Oracle has announced plans to construct a new campus in Austin dedicated to expanding Oracle’s cloud portfolio. Scott Armour, vice president of Oracle’s cloud sales organization, Oracle Direct, explained in the announcement that Austin was chosen because the database maker already has "a high-performing employee base in the region, and the surrounding technology community is teeming with creative and innovative thinkers." The first phase is scheduled to produce a 560,000-square-foot complex and parking development. Touting to support the local workforce as well, the plans also include an adjacent 295-unit apartment building allotted for employee housing and purchase. The plan calls for expansion of the Austin team by more than 50% over the next few years with a focus on hiring recent university graduates and early-stage technical professionals.

Samsung has finally agreed to pay $548 million in its long-running patent dispute with Apple. The smartphone rivals filed a joint court statement confirming that Samsung would, by December 14, pay Apple the $548 million awarded to it in September. The damages bill stems from Apple’s court award of $1 billion in damages over a patent complaint it brought against Samsung nearly five years ago.

Retail giant JD Wetherspoon has now admitted to becoming yet another victim of a cyber-attack, resulting in the potential loss of data belonging to 656,723 customers. In an email to customers, the food and drink chain said the firm’s website had been hacked between the 15th and 17th of June this year, resulting in the potential loss of customer data including names, dates of birth, email addresses and phone numbers — as well as a small amount of credit card records. While the company’s website has since been given a complete overhaul, JD Wetherspoon says that a database compromised by the front-facing website attack contained the details of 656,723 customers, including the "limited" details of 100 credit cards belonging to customers.

Toshiba’s financial struggles have reached a breaking point, leading to a restructuring effort which will see thousands lose their jobs and a loss of $4.5 billion over the fiscal year. The company, which operates in industries ranging from consumer technology to nuclear, is fighting to regain an even financial footing in the wake of an accounting scandal which shook the firm to the roots of its foundations. Toshiba executives have revealed plans to shed businesses, streamline corporate practices and bring down operating costs. Under the "Toshiba Revitalization Action Plan," the Japanese conglomerate will axe 6,800 jobs in its consumer electronics business, which is roughly 30% of the workforce, by 31 March 2016. In addition, "indirect" employees — such as contractors — will be axed, bringing labour costs down further. In addition to significant restructuring of all parts of the business the corporate headcount is due to be cut by approximately 1,000 employees. In total, this could lead to up to 10,000 job losses, including those in consumer technology, the corporate arm, early retirement seekers and contractors. Unfortunately for shareholders, Toshiba estimates that the associated costs will result in a loss of approximately 550 billion yen ($4.5 billion) by the end of the fiscal year. In FY2014, Toshiba reported a net loss of 37.8 billion yen.


> MERGER & ACQUISITION ACTIVITY

Oracle is buying StackEngine, a small Austin, Texas-based startup that develops management and automation tools for Docker containers. StackEngine’s dozen or so employees will work in Oracle’s Public Cloud unit. Docker became one of the IT industry’s hottest trends, and their momentum has shown no signs of slowing. Oracle, by adding Docker containers to its cloud portfolio, is following the lead of public cloud market leaders Amazon Web Services and Microsoft, which already support the technology. StackEngine describes its flagship product, called Container Application Center, as a way for enterprises "to transition from the costs and inefficiencies of virtualization to the flexibility, mobility and freedom of containerization."

In a move to bolster its enterprise-grade cloud computing offerings, IBM has acquired cloud-based video services provider Clearleap Inc. Clearleap will be integrated into the IBM Cloud platform and its Media & Entertainment video technology portfolio to help enterprises manage, monetize and grow user video experiences and deliver them securely over the Web and mobile devices. IBM will offer the Clearleap APIs on IBM Bluemix in 2016 to enable clients to build new video offerings quickly and easily. The Clearleap video platform — used by media and entertainment brands such as HBO, NFL, BBC America and Sony Movie Channel — is optimized for massive scalability, which enables clients to quickly ramp up and support millions of concurrent users within seconds, the company said.

Rogers has strengthened its presence in Atlantic Canada with the acquisition of Internetworking Atlantic Inc. (IAI), including the company’s Halifax-based data centre. The acquisition gives the company its first data centre in the maritimes, for a total of 16 across the country, allowing Rogers to address data residency and redundancy requirements of customers. In addition to the data centre, which offers colocation and storage to regional customers, IAI offers virtual and hosted services that run over IAI’s Internet and fibre network extending into New Brunswick, as well as professional services.

Calgary-based Shaw is buying the parent company of startup Wind Mobile for $1.6 billion, if the government agrees. One benefit of the deal is that it will make it easier — and possibly faster — for Wind to pay to upgrade its network to LTE speeds so it can match Bell, Rogers and Telus. Shaw, a Western cable company, had plans in 2008 to be a cellular carrier, spending $189 million in a spectrum auction that year for AWS frequencies largely in British Columbia and Alberta. But three years later, looking at the millions Wind and Quebecor/Videotron were spending to build networks from scratch decided to invest in Wi-Fi hotspots in major Western cities instead, as a lure for its cable customers. The strategy apparently failed to stop Telus from making inroads into Shaw’s territory. So, buying Wind — assuming approval from the Trudeau government — gets Shaw an instant network with about 940,000 subscribers.

Carbonite, which offers data protection to both consumers and businesses, is buying EVault from Seagate Technology in all-cash transaction for US$14 million. The deal, expected to close in January, will enable Carbonite to expand its product portfolio and double its addressable market, according to president and CEO Mohamad Ali, including any SMB with up to 500 employees. EVault was founded in 1997 and acquired by Seagate in 2006. It offers a full line of cloud-connected appliances supporting failover capability to more than 5,000 customers with a network of more than 500 partners in the form of resellers and managed service providers (MSPs).

Microsoft is acquiring Talko, a mobile communications company, from former executive Ray Ozzie. The startup founder served as Microsoft’s chief software architect until 2010, but he will not be returning as part of this transaction. Microsoft will be acquiring Talko’s technology and talent, and its employees will be joining the Skype division to work on Microsoft’s communication services. Talko, a mobile app for business communications, first debuted in September 2014. The app was designed to let mobile employees call, text, send voice or video messages, and hold conference calls. Users could record their chats and bookmark specific conversations. Microsoft plans to use Talko’s tech and team to build upon the capabilities of its Skype and Skype for Business platforms, the tech giant reported. It plans to shutter Talko in the coming months, and completely close the service by March 2016.

Ingram Micro has acquired the Odin Service Automation business from Parallels. The acquisition brings access to one of the leading cloud management technologies in the marketplace. The Odin Service Automation platform has been primarily used in hosting environments for independent software vendors (ISVs), cloud service providers and telecom service providers. The Odin platform provides a single, centralized management console for managing cloud services. This includes delivery of those services along with a white-label option for solution providers. Odin customers can now leverage the commercial relationships Ingram has with more than 1,700 vendors, including cloud services vendors. The acquisition also comes with 500 employees of which half are cloud software engineers. When the Odin acquisition closes, Ingram Micro will have more than 1,200 associates in cloud services.

Following its recent entry into the Canadian market with the acquisition of CMS Consulting, the Washington, D.C.-based solution provider New Signature has now bought Atlanta-based Microsoft consulting firm InfraScience. InfraScience was founded in 2003 and provides technology enabled business solutions to organizations on a global scale, delivering strategic planning, design and implementation services through a wide range of complex technology solutions, including Azure, Enterprise Mobility Suite, and Office 365. InfraScience is the third acquisition for New Signature this year and it follows the iMason deal in November and the CMS Consulting in June. The company also secured a $35 million investment from Columbia Capital in late April.


> 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/