IT Industry News – July 2015

In this Issue:

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


> GENERAL INTEREST

The economy – Canada

Employment in Canada fell by 6,400 in June from May according to Statistics Canada.  In the 12 months to June, employment increased by 176,100, or 1.0%. The Canadian unemployment rate remained at 6.8% for the fifth consecutive month. 

The Royal Bank of Canada’s Canadian manufacturing purchasing managers’ index rose above the neutral 50.0 value in June for the first time in five months, pointing to a modest recovery in business conditions across the Canadian manufacturing sector. The index rose to a reading of 51.3 in June from 48.8 in May. However, the latest reading was still below the average of 53.0 since the survey began in late 2010. 

The Canadian staffing index, a measure of staffing activity in Canada, rose to a reading of 103 in June, up from an index value of 101 in May. However, the index fell 8% year-over-year from a reading of 112 in June 2014.  The index value of 100 corresponds to the size of the industry in July 2008, when the index began

Due to skills mismatch, demand-supply imbalances, an aging workforce and other factors, Canada is headed for a major technology talent shortage in the next five years. Canada needs an additional 182,000 IT people by 2019, according to an IT labour market report funded by the Government of Canada’s Sectoral Initiatives Program.

The economy –  US

The US Conference Board’s US leading economic index rose 0.6% in June to a reading of 123.6 (2010 = 100), following increases of 0.8% in May and 0.6% in April.  "The upward trend in the US [leading economic index] seems to be gaining more momentum with another large increase in June pointing to continued strength in the economic outlook for the remainder of the year," said The Conference Board.

The US Conference Board’s US employment trends index rose in June to a reading of 129.11 from May’s downwardly revised reading of 128.47. The June reading is up 4.8% from the same month a year ago.   "The growth in the employment trends index accelerated in Q2, suggesting strong job growth through the summer."

The Institute for Supply Management’s purchasing managers index for US manufacturing rose to a reading of 53.5 in June, up from May’s reading of 52.8%. The reading indicates continued expansion, and at an increased pace.  Readings above 50 indicate growth.  Bloomberg reports manufacturing expanded in June at the fastest pace in five months.

US private sector employment rose by approximately 237,000 jobs in June from May, according to the ADP national employment report.

The Conference Board’s and PwC Network’s measure of CEO confidence rose to a level of 58 in the second quarter from 57 in the first quarter.  A reading of more than 50 reflects more positive than negative responses.  "Optimism among CEOs increased moderately in the second quarter with expectations for the US and globally slightly more upbeat."

Large-company CFOs’ long-term outlook for the North American economy remains strong despite weakening confidence in their own companies’ prospects, according to Deloitte LLP’s second-quarter CFO Signals survey. Expected growth in revenue and earnings hit an historic survey low and hiring expectations are at the lowest level in more than a year.  For the second quarter, 59% of CFOs describe North American conditions as good or very good, unchanged from last quarter.

The number of IT jobs in the US rose 0.3% in June from May, according to the TechServe Alliance, the trade association of the IT and engineering staffing and solutions industry in the US. That compares to a 0.2% increase in total nonfarm jobs in the US.  Year-over-year, IT jobs rose by 4.4% since June 2014, adding 208,200 workers for a total of more than 4.9 million jobs.  Engineering jobs edged up slightly less than 0.1% in June from the previous month and 0.7% year over year, adding 18,600 engineering workers since June 2014 for a total of more than 2.5 million US engineering jobs. 

The American Staffing Association’s index measuring employment in the US staffing industry for the week of July 6 to July 12 rose 1.27% compared to the previous week, but was down 2.99% compared with same week last year. The index value fell to 94.34.

A new TEKsystems survey found fewer IT leaders plan to increase both traditional and contingent hiring this year compared to similar surveys earlier this year.  TEKsystems’ quarterly "reality check" survey of 240 IT leaders in June found 29% planned to increases temporary hiring. That’s down from 51% in a similar survey in March and 36% in a survey at the beginning of the year. 


> COMPANY NEWS

Microsoft is laying off 7,800 people, primarily employees involved with Windows Phone hardware business.  Microsoft is also taking a $7.6 billion write-down related to its Nokia acquisition, plus a restructuring charge of between $750 million to $850 million. Microsoft plans to complete the job cuts largely by the end of calendar 2015 and completely by the end of fiscal 2016, which means June 30, 2016.

The Toronto company behind Ashley Madison and several other dating Web sites is struggling to cope with a significant hack of its systems, used by some 40 million subscribers. In addition to extortion tactics the attackers leaked some account data, maps of internal company servers, employee network account information, company bank account data and salary information. 


> MERGER & ACQUISITION ACTIVITY

Things are looking up for early-stage funding in Canada, according to a report released by the National Angel Capital Organization. NACO, which represents Angel investors in Canada, surveyed 30 groups of these investors across the country. It found that investment has more than doubled since 2012, reaching $90.5 million compared to $40.5 million three years ago.  Eighty-three percent of the total amount invested by Canadian angels in 2014 went into life sciences and ICT, and it was fairly evenly split. ICT investments received $35.2 million, while life-sciences companies saw $34.8 million in investments during 2014.

Dropbox has acquired Clementine, a messaging, voice and conferencing startup that will be shut down.  The move indicates that Dropbox will use Clementine’s technology for messaging and collaboration tools to complement what it already has. Clementine said in a blog post that it will shut down with free parts of the app available until Aug. 31. The company offered secure text messaging, call and chat at work and conference calls. The Clementine technology was largely replicated in various products by enterprise IT players both large and small.

Cisco has sold its set-top box division to French firm Technicolor for $600 million, as well as striking a patent cross licensing deal and partnership for Internet of Things services.  The deal will see Cisco’s service-provider video customer premises equipment business move to Technicolor, boosting the French firm’s installed base to 290 million set-top boxes and 185 million gateways.  The two companies have also entered a partnership to jointly build and sell next-generation video and broadband technologies and cooperate on Internet of Things devices and services.

IBM purchased San Mateo, CA-based Compose. Compose is a privately held company that provides MongoDB, Redis, Elasticsearch, PostgreSQL, and other database-as-a-service (DBaaS) offerings aimed at Web and mobile app developers.

Blackberry is buying AtHoc, makers of a secure software platform for crisis communication. AtHoc’s communications software is essentially a messaging alerts system, but for entities that need to exchange potentially sensitive and critical information between devices, organizations and people.  The purchase highlights how Blackberry continues to cater its platform toward regulated and government agencies. Privately-held AtHoc’s clients include the US Department of Defense, the Department of Homeland Security, and the US Department of Veterans Affairs. 

Cisco is buying MaintenanceNet, a maker of sales automation software, for $139 million in cash and retention-based incentives.  MaintenanceNet, a privately held company, provides a cloud-based software platform that uses data analytics and automation to manage renewals of recurring customer contracts that may be stored in separate spaces.  MaintenanceNet is best known for its cloud-based contract management platform ServiceExchange, which captures fragmented warranty and service contract data. The platform helps sales and marketing teams to spot sales opportunities by examining all of a prospect’s existing contracts.  Cisco has worked with MaintenanceNet since 2009, basically reselling ServiceExchange to its distribution and reseller partners. 

Microsoft is reputedly buying Israeli cloud access security specialist Adallom for $320 million.  Adallom, which employs 90 people world-wide, will continue to operate from Israel as a part of Microsoft’s cybersecurity-focused operations in the country.

Microsoft also acquired FieldOne Systems LLC, a vendor of software for managing and delivering services to customers in the field.  The FieldOne Sky platform provides capabilities such as scheduling and dispatch, automated routing, inventory management, customer communications and more. The core FieldOne platform was built on top of the Microsoft Dynamics xRM Framework, enabling it to work easily with Dynamics CRM, Outlook, Office 365, Azure, Skype and Yammer.  Microsoft will bring together FieldOne’s offerings with its own Dynamics CRM line. Future plans call for Microsoft to integrate FieldOne with Azure IoT and Cortana Analytics.  Microsoft will continue to support existing FieldOne customers, and for new customers, the FieldOne capability will be available with Dynamics CRM in the near future, company officials said. Microsoft’s pricing/licensing details for FieldOne’s technology will come later this summer, officials added.

Spanish travel technology firm Amadeus has acquired Navitaire from Accenture in a deal worth $830 million.   As part of the acquisition, roughly 550 Navitaire employees, including the company’s senior management team, are expected to transfer to Amadeus.  Navitaire caters for over 50 operators worldwide and focuses on providing technology services to low-cost and hybrid-carrier industry players. The firm provides solutions including reservation systems, sales, loyalty schemes, revenue management, accounting and business intelligence.  Amadeus says the addition of Navitaire’s portfolio will complement the firm’s current portfolio, which is offered to largely full-service carriers. Therefore, the acquisition will give Amadeus a wider customer base in the airline industry.  The Madrid-based company plans to market and sell each portfolio separately and will continue to invest in both platforms. 

Level 3 has bought DDoS mitigation firm Black Lotus.  While the security threat landscape is in a state of evolution and is becoming ever-more complex, distributed denial-of-service (DDoS) remains a popular method for threat actors to disrupt online services.  You no longer need your own dedicated systems or a vast network of slave computers under your control in order to launch such an attack; instead, DDoS campaigns can be launched by those without a sliver of IT expertise simply by hiring someone else to do the job for you.  Hacktivist group Lizard Squad is only one out of many providers which offer "DDoS for hire" services — giving online users the option to hire a botnet for as little as a few dollars. According to Akamai Technologies, DDoS attacks have nearly doubled since 2013 — and the rise of the Internet of Things (IoT) is having a profound impact on the threat landscape. If security companies are going to be able to handle this increase and lure enterprise clients to the fold — being so often a target of DDoS — they must have the correct tools and services in their portfolio.  Security services firm Level 3 said the acquisition of privately-held Black Lotus, a provider of global DDoS mitigation services, "represents another step in Level 3’s continued commitment to provide leading security product capabilities."  The buyout will give Level 3’s existing DDoS additional capabilities, including the addition of extra scrubbing centers and the improvement of network routing, rate limiting and IP filtering abilities. 

Capital One, a bank and credit card company, has acquired Monsoon, a design, development and marketing services firm, and rolled out a digital platform for customers that starts with an iPhone app.  The moves highlight how multiple industries are trying to transform to be more digital. Capital One is aiming to be seen as a technology company as much as a financial institution. Capital One previously acquired digital design firm Adaptive Path and its personal finance app called Level Money. Capital One’s acquisition of ING Direct, a mostly digital bank, was the beginning of a transformation effort that started in late 2010. 

eBay is selling its eBay Enterprise unit for $925 million to a private equity firm ahead of the PayPal spin-off. Permira Funds and Sterling Partners were the primary buyers. The deal is expected to close in the second half. Permira also counts Informatica and Freescale as portfolio companies.  EBay Enterprise, which used to be GSI Commerce, was acquired by eBay for $2.4 billion in 2011.  EBay Enterprise is a competitor to Amazon’s fulfillment business for third party sellers and had customers such as Toys R Us and Dick’s Sporting Goods. However, both companies are defecting from eBay Enterprise to better integrate their physical and digital sales channels.  eBay also announced that PayPal will be spun off as an independent entity. PayPal is expected to be better equipped to compete with Apple Pay, Google Pay and a host of other rivals as an independent entity. 

HP will acquire Stackato, an early, commercially supported version of the Cloud Foundry developer platform with its own user interface, for an undisclosed price.  Stackato, which was founded by ActiveState, underpins HP’s Helion Development Platform — HP’s public cloud version of platform-as-a-service launched last October.