IT Industry News – July 2016

A Little History of July in previous years

Five years ago, in July 2011, Dell’s move into networking with the purchase of Force10 was possibly the most significant tech deal, with Google (Punchd), Twitter (Backtype) and Adobe (EchoSign) all picking up smaller players to help move their agenda. Three years ago, in July 2012, Marissa Mayer became the new CEO at Yahoo and Dell bought Quest Software for $2.4 billion; Apple picked up Authentec for $356 million and Socialcam acquired Autodesk for $60 million. Oracle was on a roll, buying (i) the assets of Skire (capital assets and facilities management software), (ii) Involver (a social marketing tools company) and (iii) Xsigo Systems (Network Virtualisation). Vmware was also busy, picking up Dynamic Ops (virtualisation software) and Nicira (a start-up in the networking software space). One interesting deal saw Digg bought for $500,000 by Betaworks, when Digg had been valued at $200 million just four years ago. July 2013 was quiet for M&A activity but there were some interesting deals, with the big deal involving perennial acquirer Cisco shelling out $2.7 billion for security vendor Sourcefire. There were some other big names out shopping with EMC buying identity management company Aveska, Intel making an acquisition in Israel (a trend) of Omek, a company specialised in the perceptual computing arena. Apple bought Locationary, a Toronto company that is expected to be involved in improving Apple’s maps for iOS (remember when Apple dropped Google Maps!). Finally, Ottawa’s Shopify bought a Toronto-based design agency Jet Cooper. Two years ago, July 2014 had a lot of M&A activity but no real blockbuster deals. Blackberry bought encryption company Secusmart GmbH; Oracle bought cloud services company TOA Technologies; Twitter bought a startup Madbits, a company that focuses on the media space; Yahoo also bought a startup, Flurry, in the mobile apps space; Teradata bought a couple of smaller “big data” companies, Hadapt and Revelytix; Apple bought a couple of smaller “books & podcast” companies — Booklamp and Concept.io; Qualcomm bought education company EmpoweredU; and finally Nokia continued to rebuild after selling its devices and handsets business to Microsoft, this time buying Panasonic’s 3G and LTE base station operations division. July 2015 saw no billion dollar deals, but there was some activity with some big names out shopping. Microsoft made two acquisitions, paying $320 million for cloud security company Adallom and also picked up customer servicing software company FieldOne Systems. IBM picked up database as a service company Compose; Cisco paid $139 million for sales automation company MaintenanceNet; HP bought a cloud development platform Stackato; Blackberry bought, AtHoc which is a crisis communication tool; and DropBox bought messaging company Clementine. Other acquisitions saw Cisco as a seller, with Technicolor paying $600 million for Cisco’s set top box division; Level 3 bought security firm Black Lotus; Amadeus bought travel software company Navitaire (a subsidiary of Accenture) for $830 million; eBay sold its Enterprise unit for $925 million, having paid $2.4 billion for it 4 years ago. In the continued blurring of the lines between technology companies and other industries, Capital One bank acquired design, development and marketing firm Monsoon.

Which brings us back to the present

July 2016 saw some large deals, with Verizon making two multi-billion dollar acquisitions. The big name was Yahoo, who they bought for $4.83 billion, but they also paid $2.4 billion for Fleetmatics who provide fleet and mobile workforce management services. Oracle were also out spending big dollars, paying $9.3 billion for cloud-based ERP company, Netsuite. Now if those deals were not big enough, Softbank (like Verizon, they have a large telco presence – formerly Vodafone) paid a whopping$32.2 billion for chip designer ARM Holdings. Also joining the July billion dollar club was security vendor Avast, who bought AVG for $1.3 billion. Other deals this month saw Salesforce pay $582 million for cloud-based startup Quip; Google bought video company Anvato; Terradata bought training company Big Data Partnership; and Opentext bought analytics company Recommind.

Other companies in the news in July were Microsoft for their continuing layoffs associated with their Nokia purchase and Facebook’s internet drone program reached a milestone with its first flight. Oracle also lost a $3 billion lawsuit to HPE going back to a 2011 decision to not support HP Itanium servers.

Things are slow here in Canada, and the US continues to create jobs and show positive signs.

In this Issue:> General Interest
> Company News
> Merger & Acquisition Activity
> Primary Sources

> GENERAL INTEREST

The economy — Canada

The RBC Canadian manufacturing purchasing managers’ index stepped down to a reading of 51.8 in June, down slightly from 51.2 in May. Although the index posted above the 50.0 no-change value for the fourth month running, the latest reading signaled only a marginal upturn in overall business conditions and the weakest pace of improvement since March.

The Canadian staffing index rose in June, breaking a trend of moderate year-over-year declines. The index, which measures staffing activity in Canada, rose to a reading of 106 in June, up 3% from June 2015.

Employment in Canada was unchanged in June according to Statistics Canada. Compared to the same month a year ago, Canada was up about 108,000 jobs. Canada’s unemployment rate fell to 6.8% in June.

The economy – US

Most US hiring managers expect to increase hiring in the year ahead, according to the semi-annual hiring survey from DHI Group Inc. The survey found 62% of hiring managers and recruiters in the US anticipate more hiring in the next six months, a slight uptick of one point from a similar survey conducted in December 2015.

Economic activity in the US nonmanufacturing sector increased in June at a faster pace than May. The Institute for Supply Management’s nonmanufacturing composite index rose to a reading of 56.5 from May’s reading of 52.9. Readings above 50 indicate expansion in the sector.

The US Conference Board’s consumer confidence index was relatively unchanged in July following an increase in June. The index edged down to a reading of 97.3 (1985=100) from a reading of 97.4 in June.

The American Staffing Association’s index measuring employment in the US staffing industry rose to a reading of 93.45 for the week of July 11 to July 17. Temporary and contract staffing employment rose 3.18% from the prior week, which included the Independence Day holiday, but edged down 0.21% from the same week last year. The four-week moving average for the ASA Staffing Index has been higher than the comparable period of last year for five consecutive weeks.

US real GDP grew at an annual rate of 1.2% in the second quarter, according to an “advance” estimate of GDP growth by the US Commerce Department. This follows an increase of 0.8% in the first quarter.

The Institute for Supply Management’s purchasing managers index for US manufacturing activity rose in June for the second consecutive month, reaching its highest level since February 2015. The increase signals the sector is entering the second half of the year with renewed strength.

The US Conference Board’s measure of CEO confidence rose to a level of 53, up from 47 in the first quarter of 2016. A reading of more than 50 reflects more positive than negative responses.

US private-sector employment rose by 172,000 jobs in June from May, according to ADP.

The US Conference Board’s Leading Economic index rose 0.3% in June to a level of 123.7 (2010 = 100) after falling 0.2% in May. The board suggests that while the index continues to point to moderating economic growth in the US through the end of 2016, the expansion still appears resilient enough to weather volatility in financial markets and moderating outlook in labor markets.

Nearly half of US workers, 49.6%, are satisfied with their jobs, according to the US Conference Board Job Satisfaction survey. This is up from 48.3% in 2014 and the highest level since 2005.

The vast majority of business leaders, 83%, believe attracting and retaining talent is an issue for their organization, according to the Talent Advisory Industry Benchmark study released by Allegis Group Inc. And more than half of organizations reported open positions for which they cannot find quality candidates.

The economy – outside Canada and the US

Mexico’s economic activity is expected to have grown at a slower pace of 1.7% year-on-year in May, but still signifies a rebound from a sharp drop in April on a sequential basis, EconoTimes reports.


> COMPANY NEWS

Microsoft continues to downsize its involvement in the mobile devices market, with plans to eliminate 2,850 more jobs. Microsoft stated, “In addition to the elimination of 1,850 positions that were announced in May 2016, approximately 2,850 roles globally will be reduced during year as an extension of the earlier plan, and these actions are expected to be completed by the end of fiscal year 2017”. So far Microsoft’s restructuring plans have cost it $709 million, mostly from paying severance to laid off workers.

Facebook’s Aquila internet drone, a self-piloting Facebook drone with a wingspan greater than that of a Boeing 737, completed its first flight. It’s another move by companies such as Facebook and Google to deliver internet services through unconventional means. On the heels of its announcement this week for a laser-based solution to routing the wireless web, social media titan Facebook completed the first successful flight of Aquila, the company’s solar-powered plane designed to beam the internet to remote parts of the world. The flight, which took place before dawn in Yuma, Ariz., on June 28, was only meant to last for 30 minutes, but the test went so well that the team decided to keep the plane flying for up for 96 minutes. The eventual goal is to have a fleet of the drones flying at 60,000 feet, communicating with each other with lasers and staying aloft for months at a time. That duration would allow Facebook to break the record for the longest unmanned aircraft flight.

Oracle has been ordered to pay Hewlett Packard Enterprise $3 billion in damages in a long-running breach-of-contract lawsuit that claimed Oracle stopped software support of the Itanium server platform in March 2011, thereby hurting HP and its customers. Back in 2011, prior to Hewlett Packard splitting itself into two separate companies, HP filed a lawsuit against Oracle, when the enterprise software maker announced it would discontinue support for the high-end HP Itanium servers. At the time, Oracle claimed it did not have a binding agreement to support Itanium and, according to the Journal, its decision was also based on a perception that Intel itself had moved to discontinue support on the Itanium chip that it had created. HP, however, contended the decision was based on a move by Oracle to push its customers over to the servers it acquired through its Sun Microsystems acquisition, which were running Oracle software.


> MERGER & ACQUISITION ACTIVITY

Verizon Pays $2.4B for Fleetmatics

Verizon Communications plans to buy Ireland-based Fleetmatics for about $2.4 billion. Combined with its recent purchase of Telogis, Verizon is primed to become the end-to-end provider of fleet and mobile workforce management services on a nearly global basis. Fleetmatics is headquartered in Dublin, Ireland, with North American headquarters in Waltham, Mass. The company boasts some 37,000 customers, 737,000 subscribers, and 1,200 employees. It offers fleet operators with data about their vehicles, including location, fuel usage, mileage, speed, and more. Fleetmatics customers use this data both to reduce operating expenses and find ways to generate more revenue. The company will be folded into Verizon’s existing Telematics business. Verizon bolstered its Telematics unit last month when it closed its acquisition of Telogis. Telogis, based in Aliso Viejo, Calif., provides cloud-based mobile enterprise management software. Verizon Telematics now operates in more than 40 markets around the world and offers wireless, software, and hardware solutions to consumers, enterprises, automakers, and dealers. Verizon says the pair of acquisitions puts it in a better position to target what it sees as a “lightly penetrated” and “fragmented” market more effectively thanks to its large distribution channel. Once the Fleetmatics acquisition closes, businesses that operate fleets may have fewer individual vendors to deal with. The expectation is that once Verizon integrates Telogis and Fleetmatics offerings into its own, SMBs will only need to contact Verizon for sales and support, rather than Verizon and Fleetmatics separately.

Salesforce Pays $582M for Quip

Salesforce plans to pay $582 million for cloud based start-up, Quip, an online word processing service. Combined with previous investments in Quip, the total price might be more like $750 million. Quip was founded in 2012 by former Facebook CTO Bret Taylor and Kevin Gibbs, who had previously worked in Google’s infrastructure group. The startup had raised $46 million in venture funding. Quip’s mobile-friendly productivity platform aims to change the way people collaborate so that they don’t have to rely on email. The idea is to let users create and manage documents together with built-in chat capabilities. The acquisition of Quip puts Salesforce in a position to better compete with productivity platforms Google Drive and Microsoft Office 365, whose companies are also trying to position them for the future of mobile work.

Oracle Pays $9.3B for Netsuite

Oracle is acquiring the cloud-based enterprise resource planning (ERP) software firm NetSuite Inc. for $9.3 billion in cash. Oracle CEO Mark Hurd described the deal as one between two complementary software services. Both software offerings will coexist and Oracle plans to “invest heavily” in both products. Oracle, an on-premises software player that has often served as the antithesis for Salesforce.com’s Marc Benioff’s evangelizing of cloud software, gains an immediate cloud presence and the recurring subscription revenue that comes with it. Netsuite’s revenue sits at about $800 million annually, according to Constellation Research.

Verizon Paying $4.83B for Yahoo

Verizon has entered into an agreement to buy Yahoo for approximately $4.83 billion in cash. Yahoo, a name that is synonymous with the Internet, was founded in January 1994 by Jerry Yan and David Filo and grew rapidly during the 1990s. Today many remember Yahoo as a brand that was once the iconic homepage for web users during that first decade of its existence. However, with the burst of the dot-com bubble in the early 2000s and the rise of Google and Facebook, Yahoo began a decline that eventually led to its sale to Verizon. Verizon is planning to combine Yahoo with AOL, a competitor of Yahoo, which was acquired last year by Verizon. This latest addition to the Verizon family will offer its customers and advertisers more robust services in content and marketing. What Verizon is banking on with this new deal is to emerge with one of the largest portfolios in the world of global brands with widespread distribution capabilities. This new combination will have more than 25 brands to further investment and growth.

OpenText Buys Recommind

Waterloo-based OpenText has been making some big changes in the past month. Most recently, the company closed its acquisition of eDiscovery and information analytics provider, Recommind, Inc. OpenText’s CEO and CTO Mark J. Barrenechea claims the acquisition will complement the company’s pre-existing EIM solutions. By leveraging Recommind’s platform and solution suite, customers will benefit from increased visibility into structured and unstructured data. “Recommind information analytics can be used to solve problems at a scale not previously feasible without machine learning and is expected to be a critical component of the OpenText EIM strategy. With its technology, talent and market opportunity, Recommind offers an extraordinary opportunity and we are pleased to welcome them to OpenText.” Recommind has provided analytic solutions for eDiscovery, investigations, contract analysis and information governance. Their products include Decisiv Search, Perceptiv and Axcelerate. OpenText aims to help organizations discover and manage information using integrated solutions such as: Content Suite, Process Suite, Experience Suite, Discovery Suite, Business Network and Analytics.

Softbank Pays $32.2B for ARM

SoftBank Group Corp. is buying U.K.-based chip designer ARM Holdings PLC for 24.3 billion pounds ($32.2 billion). “Ray” Wang, founder and principal analyst of Silicon Valley-based Constellation Research Inc., wasn’t surprised by the acquisition, regarding it as a simple matter of SoftBank recognizing a superior product when it saw one. “The combination of Brexit and the future of 5G tech made ARM’s 64-bit tech very attractive,” Wang said. “ARM cores are faster, more powerful, and more energy-efficient than anything else on the market, and SoftBank had been exploring the future of mobile anyway. This acquisition puts them back in the limelight.” In addition to ARM, SoftBank’s other high-profile investments in recent years have included a 35% stake in Yahoo Japan, a controlling stake in American telecom provider Sprint, which was acquired in 2013, and an early stake in Chinese tech giant Alibaba, part of which it sold earlier this year for $7.9 billion USD. ARM, meanwhile, has become the largest London-listed tech company by market value since its founding in 1990. While the company does not manufacture any chips of its own, its processor and graphics technology is used in some 85% of mobile devices worldwide, including smartphones manufactured by Samsung, Huawei, and Apple. To help it along, SoftBank plans to invest $40 billion USD into ARM’s mobile computing efforts, $36 billion USD into the development of enterprise infrastructure, and $45 billion into embedded intelligence between now and 2020. As part of the acquisition, SoftBank has also pledged to preserve ARM as an independent organization, including its U.K. headquarters, and to double the company’s U.K. workforce over the next five years.

Avast Pays $1.3 Billion for AVG

Security vendor Avast is acquiring fellow antivirus maker AVG, best known for its free consumer products, in a cash deal valued at $1.3 billion. In addition to scale, Avast is looking to broaden its portfolio to look at areas such as IoT, as well as increasing “geographical breadth,” the company said in a statement. While the two companies are both headquartered in the Czech Republic and have offices worldwide, AVG has locations in the UK, Canada, Israel, Australia and Brazil where Avast does not have physical presence. According to Avast, the combined user base will include more than 400 million endpoints, of which 160 million are mobile.

Teradata Buys Big Data Partnership

Data warehouse and analytics company Teradata has added to its training and consulting bench with the acquisition of Big Data Partnership, a London-based startup that should also extend the company’s global reach. The amount of data collected by enterprises continues to grow, and yet organizations still struggle with getting value out of that data because of a gap in cloud and data skills. To bridge the gap, many vendors from the major Hadoop distributors, to online course providers, to Microsoft are providing online training. This training helps companies teach their existing employees and assists IT workers who want to enhance their careers by acquiring in-demand data analytics and management skills. That’s the backdrop for Teradata’s acquisition of Big Data Partnership, a three-year-old big data solutions and training business with expertise in in big data technologies such as Apache Hadoop. Teradata, which Gartner ranked as a Leader in its most recent Magic Quadrant report for Data Warehouse and Data Management Solutions for Analytics, is buying this EMEA-based startup for an undisclosed sum. The acquisition will become part of Teradata’s Think Big consulting practice, and help Teradata expand its customer data science education and consulting efforts into new territory. These services are part of the company’s efforts to close the data analytics skills gap for its customers.

Google Acquires Anvato, a Video Software Startup

Google is looking to bolster its footing in the OTT video market with the purchase of Silicon Valley startup Anvato. The deal will help Google compete with similar services from Microsoft’s Azure cloud. Google is acquiring Anvato, a Mountain View-based startup that provides a software platform that automates the encoding, editing, publishing, and secure distribution of video content across multiple platforms. The move could help Google bolster its foothold in the cloud-based video delivery market. Anvato’s Media Content Platform (MCP) is a software-based video supply chain platform that guarantees video playback and monetization from signal to screen.

The adoption of over-the-top (OTT) technologies has emerged as a critical platform for delivering rich audio, video, and other media through the internet. Belwadi Srikanth, senior product manager for Google Cloud Platform, noted the acquisition would complement Google’s efforts to enable scalable media processing and workflows in the cloud. Anvato offers a variety of services, including technology for immersive 360-degree video offerings with no requirement for separate workflows to process content.

For example, the company’s 360 Degree Video outputs are playable using Anvato’s Player SDK. They are processed and played without buffering. Content-aware encoding allows the playback component to optimize the experience in all fields of vision by leveraging massively parallel video processing, so enabling rapid delivery of files that support 360-degree video.

Right now, the Google Cloud Platform offers users content ingestion and creation, graphics rendering, storage and archival, and video transcoding and distribution for live streaming.


> 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/