IT Industry News – June 2016

June 2016 was certainly an interesting month, with the Brexit vote upsetting the markets and causing uncertainty that will likely continue for some time yet; plus there was plenty of M&A activity. The big deal was undoubtedly the Microsoft purchase of LinkedIn for a whopping $26 billion. There were other billion dollar deals this month too, Salesforce paid $2.8 billion for e-commerce platform maker Demandware and Amazon announced an extra $3 billion investment in its India operations. Other significant deals saw Daetwyler Holdings AG pay more than $877 million for Raspberry Pi maker Premier Farnell Plc; Red Hat paid $568 million for API management software company 3Scale; and OpenText paid $315 million for HP’s Customer Communication Management products. Other deals saw an investment group buy Dell’s software arm; Microsoft bought natural language start up Wand Labs; and Samsung bought cloud computing company Joyent. Also, Google Capital announced its first investment in a public company, investing $46 million in Care.com, an online personal services marketplace platform.

The US economic news was less buoyant, but they still added 170,000 new jobs and all indicators are relatively positive, just not as positive as the past couple of years. Canada continues to show little sign of booming, but that is likely expected given our dependence on a hurting resource sector and the ambivalence of our governments to provide any help to that sector.

In this Issue:

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


> GENERAL INTEREST

The vote to leave the EU by UK voters has caused considerable discussion and speculation about what it might mean for various sectors, including tech. It is difficult to fully understand the implications of such a complex situation yet, but clearly there are going to be serious ramifications. The fallout of Brexit is something to watch for sure.

An EY survey found that only 46% of workers placed a great deal of trust in their employers, and only 49% placed a great deal of trust in their boss or colleagues. Workers in India, Mexico and Brazil are among the most likely to place a great deal of trust in their current employer. Respondents in Japan, the UK and the US are the least likely to do so.

A study from the Ponemon Institute, and funded by IBM, found that the average cost per record stolen or lost went up 10.6% compared to the same period the year before. The report is part of an annual global study of breaches in 13 countries (United States, United Kingdom, Germany, Australia, France, Brazil, Japan, Italy, India, the United Arab Emirates, Saudi Arabia, Canada and, for the first time, South Africa), which last year covered 383 organizations.

There will be 52 million units of virtual reality head-mounted displays by 2020 as businesses and consumers become users, but marketing execs need to time investments and strategies carefully, according to Forrester Research. Enterprises are expected to drive adoption of VR going forward. Companies will use them for content, healthcare, retail, e-commerce, data visualization and collaboration. Enterprises such as Unilever, McDonalds and sports brands will target VR.

The economy – Canada

Employment in Canada changed only slightly in May, gaining 13,800 according to Statistics Canada. Compared to the same month a year ago, Canada was up 0.6% to 108,500 jobs in May, the result of gains in full-time work. Canada’s unemployment rate fell to 6.9% in May from 7.1% in April and total employment in Canada was approximately 18 million.

Canada’s unemployed are increasingly stuck, with difficulty getting interviews and work, according to Express Employment Professionals’ third annual State of the Unemployed national survey. Canada’s unemployed are now out of work for an average of 16 months, compared to 14 months in 2015. Nearly half, 44%, have not had a full-time job in more than a year.

The Canadian staffing index fell in May, continuing a trend of moderate year-over-year declines. The index, which measures staffing activity in Canada, fell to a reading of 101 in May, down 1% from May 2015.
If you had trouble hiring in the past year or so, you are not alone.
According to a new study, nearly half of IT leaders, or 46 per cent surveyed, had difficulty filling IT positions in the past 12 months.

A survey by the Canadian Internet Registration Authority (CIRA) showed that 55% agreed recruiting and retaining the right talent is necessary for global competitiveness. 40% had had trouble finding the right skills for tech positions.

The economy – US

ADP reported that US private-sector employment rose by 173,000 jobs in May from April, with job creation apparently slowing as the year progresses.

Economic activity in the US nonmanufacturing sector increased in May at a slower pace than April. The Institute for Supply Management’s nonmanufacturing composite index fell to a reading of 52.9 from April’s reading of 55.7.

Economists surveyed by the National Association for Business Economics lowered their growth projections for the US economy in 2016 and 2017. The median forecast in the new survey is for inflation-adjusted US real gross domestic product to grow at an annualized rate of 1.8% in 2016, down from 2.2% forecasted in a March survey. The median forecast for 2017 edged down to 2.3% real GDP growth from 2.4% in the March survey.
Real GDP grew 2.4% in 2015.

Optimism about the US economy among certified public accountants who hold leadership positions in their companies — such as CFO or controller — rose since last quarter, although those executives remain more guarded in outlook than they were a year ago, according to the second-quarter Economic Outlook Survey released by the American Institute of CPAs.
While 37% of CPAs in leadership positions expressed optimism about the US economy over the upcoming 12 months — up from a three-year low of 28% last quarter — that measure stood as high as 68% in the first quarter of 2015. Meanwhile, the CPA outlook index (a gauge of executive sentiment within the survey) rose five points in the second quarter to 68, but still remains well below a post-recession high of 78 set in the fourth quarter of 2014.

The number of IT jobs in the US edged up 0.2% in April from March to more than 5.1 million, reported TechServe Alliance. Year-over-year, IT employment in the US rose by 3.8% in April, adding 189,100 IT workers.

The TechServe Alliance reported that the number of US engineering jobs edged up 0.1% in April from March to more than 2.5 million jobs. Year-over-year, the increase was 0.8%, adding 21,100 engineering workers.

While increasing slightly from 2015, fewer than one in five IT professionals consider the work they are currently doing to be the most stressful of their career, according to TEKsystems’ annual IT stress and pride survey. Results showed that 14% of entry to mid-level IT professionals and 18% of senior IT professionals consider the work they are currently doing to be the most stressful of their career, up from the 11% and 13%, respectively, who said the same in a similar survey in 2015. However, both years saw a significant drop from the 2014 survey, in which 30% of entry- to mid-level IT professionals and 32% of senior IT professionals considered their work to be the most stressful of their career.

The inadequate supply of qualified and skilled talent is the second-biggest threat to US companies’ ability to meet revenue or business performance targets, second only to "increased competitive pressures," according to the Randstad US Workplace Trends report. Meanwhile, increasing turnover rates are exacerbating the challenge with 41% of companies indicating their turnover rate increased in the last year.

Fox Business reported the International Monetary Fund downgraded its forecast for the US economy. It now calls for growth of 2.2% this year, down from a forecast in April that called for 2.4% growth. It also said the Federal Reserve should hold off on raising interest rates. In addition, the IMF warned that declining labor force participation, falling productivity growth, a widening income gap and high levels of poverty could further hamper the US economy to expand.

The US Conference Board Leading Economic Index declined 0.2% in May to a level of 123.7. The decline was attributed to an increase in unemployment insurance claims. May’s decline follows a 0.6% increase in April and a 0.1% increase in March.

American worker confidence rebounded in the first quarter after falling in the previous two quarters, according to the latest national Worker Confidence Index released by staffing provider Yoh and HRO Todaymagazine. The index measures four drivers of worker confidence: likelihood of job loss, likelihood of promotion, likelihood of a raise and trust in company leadership. Levels rose across all four categories in the first quarter to a total reading of 96.8 from a reading of 94.2 in the fourth quarter of last year.

US real gross domestic product grew at an annual rate of 1.1% in the first quarter, according to a third estimate of GDP growth by the US Commerce Department. The new estimate is improved from an earlier second estimate that pegged growth at 0.8%.


> COMPANY NEWS

Care.com an online personal services marketplace platform that ranks among the largest human cloud firms, announced Google Capital made a $46.35 million investment in the company, which makes Google Capital the largest shareholder in Care.com. The investment is Google Capital’s first in a publicly traded company; it also owns stakes in private tech companies including job-rating website Glassdoor Inc. and fantasy sports company FanDuel Inc. Launched in 2007, Care.com counts 11.0 million families and 8.6 million caregivers across 16 countries, including the US, UK, Canada and parts of Western Europe, and approximately 800,000 employees of corporate clients with access to its services.

Amazon announced this week that the company will expand its investment in operations in India by another $3 billion, from $2 billion to $5 billion. The money will expand Amazon’s cloud and retail operations in India. Amazon will, however, face local competition in India as it did in China. Amazon has built 21 fulfillment centers in India and employs 45,000 people there. Amazon isn’t alone in seeing India’s potential. Both IBM and Microsoft previously announced plans to expand their cloud services in India.


> MERGER & ACQUISITION ACTIVITY

Microsoft Pays $26 Billion for LinkedIn

Microsoft is buying social media company LinkedIn for more than USD $26 billion, making it one of the most expensive tech acquisitions of all time. At the price, the Redmond, Wash.-based software giant is paying $196 per share for the company, a 49% premium. However, this pales in comparison to LinkedIn’s valuation of $270 per share back in early 2015. The social network, which allows professionals and students alike to post resumes and connect with each other, has been struggling in recent months. Ad revenue, which reports indicate accounted for only less than 20% of revenue, has been slowing, as has been growth in its user base, which currently amounts to roughly 430 million. Just last month, the website also saw millions of accounts hacked and credentials put up for sale. The sale means that Microsoft is officially in the social media business, despite the now-subsidiary operating as an independent unit and LinkedIn chief executive Jeff Weiner staying on board. It also means Microsoft will have more than 400 million new customers to sell products and services to. If approved, the sale would become the third largest tech acquisition of all time, and Microsoft’s largest acquisition under CEO Satya Nadella. It is exceeded by Dell-EMC ($67 billion) and HP-Compaq ($33.6 billion).

Salesforce to Buy Demandware for $2.8 billion

Salesforce.com says it plans to acquire e-commerce platform maker Demandware in a $2.8 billion deal. That’s one of the largest acquisitions for the cloud-computing software firm to date. In addition to giving it a presence in the fast-growing e-commerce market, the buy bolsters Salesforce’s efforts to build out its Customer Success Platform. Demandware will serve as the foundation for the new Salesforce Commerce Cloud. Salesforce is expecting to gain a leading provider of enterprise cloud commerce solutions that helps to power a multi-billion dollar digital commerce industry. Demandware’s technology powers the e-commerce for such customers as Lands’ End, L’Oreal, and Marks & Spencer. The digital commerce platforms market is expected to soar 14% annually to reach $8.54 billion by 2020, according to Salesforce, which cites a Gartner report released in March. Salesforce will not only be able to jump-start its efforts into digital ecommerce with the Demandware acquisition, but will add yet another service it can bolt onto its Customer Success Platform, which it launched in late 2014. The Customer Success Platform is designed to allow companies to connect to their customers via mobile and social tools powered by the cloud for such things as sales, customer service, marketing, apps, communities, and analytics. The company says it plans to use its Salesforce Commerce Cloud as an "integral part" of its Customer Success Platform. For Salesforce, it expects its Demandware acquisition to increase its fiscal-year 2017 revenue by roughly $100 million to $120 million.

Red Hat Announces 3Scale Acquisition, $1 Billion Stock Buy-Back

Red Hat reported its revenues were up 18% in the first quarter of its 2017 fiscal year, totaling $568 million. It also announced a $1 billion stock buy-back program and its acquisition of API management software provider 3Scale. The company spent $66 million to buy back 900,000 shares of its common stock in the first quarter, its last installment in a plan to spend $500 million on buy-backs. It used a total of $329 million. That program will be replaced with a follow-up buy-back plan of $1 billion over the coming year. The buy-back uses up some of the cash accumulated from profitable quarters, and tends to increase the value of the remaining shares in the marketplace, according to Frank Calderoni, executive vice president for operations and CFO. In addition, Red Hat announced that it was acquiring 3Scale, a firm that produces API management software. 3Scale produces a containerized gateway to Red Hat’s OpenShift that is useful to developers using OpenShift. No price was disclosed in the announcement of the deal.

Silicon Valley Investment Firms Acquire Dell Software

The Round Rock, Texas-based software arm of computer giant Dell is being acquired by New York City-based hedge fund Elliott Management Corp. and San Francisco-based private equity firm Francisco Partners. Known best for its network security solutions, Dell Software’s portfolio also spans analytics, database management, data protection, endpoint systems management, identity and access management, Microsoft platform management, and performance monitoring. Francisco Partners focuses exclusively on acquisitions and investments in the technology sector. Its transaction values have ranged from $50 million USD to over $2 billion USD, according to the firm, and to date it has raised approximately $10 billion USD in capital and invested in more than 150 technology companies since being founded in 1999. Elliott Management, meanwhile, supported the deal through its recently established Menlo Park affiliate, Evergreen Coast Capital.

OpenText Buys HP’s Customer Communication Management Products

OpenText Corp. announced it had signed a definitive agreement to acquire the Customer Communications Management (CCM) products of HP Inc., including HP Exstream, HP Output Management, HP TeleForm and HP LiquidOffice for customer communications management, process automation and document delivery solutions. OpenText expects this acquisition to complement OpenText StreamServe, OpenText MediaManager, OpenText TeamSite, and OpenText MediaBin, and allow the company to better serve its customers by offering a wider set of CCM capabilities in areas, including authoring, workflow and composition for multichannel document presentment and interactive communications. In addition to the acquisition, the company announced they are exploring opportunities to work together in the future to broaden their software offerings. The deal is worth approximately US$315 million, with the assets being acquired expected to generate between US$110 and US$125 million of annualized revenues. This isn’t the first time OpenText has snapped up HP assets. In April, it announced it had entered into a definitive agreement to acquire some of its customer experience software and services assets from HP Inc., including HP TeamSite, a modern multi-channel digital experience management platform for web content management, and HP Qfiniti, an intelligent workforce optimization solution designed to improve enterprise contact center management.

Wizeline Buys Wize Services

Product strategy and development software firm Wizeline just bought its own spinoff services company Wize Services a year after it was launched. Founded by Bismark Lepe, former Google employee and founder of video content platform firm Ooyala, Wizeline was conceived to help companies streamline the product development process. Wize Services provides ‘pods’ of engineers, UX designers, tech writers and project managers who would take projects on. It typically focuses on long-term, difficult projects for Fortune 150 clients. The services company had to operate independently of Wizeline, even though it shared the same office, to demonstrate to Wizeline’s VC funders that their investment was not being diluted by the distraction of another venture. Wize Services had another CEO, and his Wizeline sales people were not allowed to sell Wize Services to clients. Wize Services is now established, with about 60 staff, and will bolster Wizeline’s entire headcount to around 110. That’ll hit 200 by year’s end, when it should also be profitable.

Raspberry Pi Maker Sells For $877.7 million

One of the largest manufacturers of Raspberry Pi computers agreed to be acquired, bringing to an end the British-owned manufacture of the incredibly popular tiny computer. Premier Farnell PLC, based in Leeds, began manufacturing Raspberry Pi systems in 2012. It is being purchased for $877.7 million by Daetwyler Holding AG, a Swiss supplier of electronic components. Premier Farnell, which was founded before World War II, had become a conglomerate, selling parts and components ranging from fire-fighting equipment to printed circuit boards. After a series of earnings warnings last year, the company began to divest non-electronic businesses, finishing the process by agreeing to be acquired by Daetwyler. Daetwyler, founded in 1915, is the larger company, with a current value of around $2.35 billion. The $877.7 million price agreed to for Premier Farnell is a significant premium on the company’s pre-purchase valuation.

ServiceNow Buys Cybersecurity Startup BrightPoint Security

IT management services company, ServiceNow, is buying BrightPoint to bolster its recently released security operations platform. Founded in 2011 by a former CSO of Merrill Lynch, BrightPoint offers businesses a distributed analytics approach to cybersecurity prevention and detection. Its sales pitch is that it can help customers understand the level of an attack and how to act against it. The San Mateo, California-based startup used to be known as Vorstack until it changed its name about a year ago.

Microsoft Buys Wand Labs

Microsoft has acquired Wand Labs with the intention of improving messaging apps and bots with enhanced natural language technology.
Microsoft has confirmed its acquisition of messaging app company Wand Labs. Wand Labs is focused on developing new technology for messaging apps. It was founded in 2013 with the goal of leveraging mobile scale, natural language, and third-party services so users could access and share authorized services and devices. The startup has built its expertise around semantic ontologies, services mapping, third-party developer integration, and conversational interfaces. Wand’s work on the future of messaging makes Wand a natural fit for Microsoft, which has been increasing its focus on improving communication, particularly for intelligent agents and cognitive services. The people and technology at Wand Labs will join Microsoft’s Bing engineering and platform team as part of the acquisition. There, they will continue building on the messaging technology currently integrated into Microsoft services.

Samsung Buys Joyent

Samsung is buying Joyent, which offers its own technology to run private and public clouds. San Francisco-based Joyent was one of a handful of veteran stand-alone companies with expertise in cloud computing. It faced an array of rivals in the OpenStack camp as well as tech behemoths Amazon, Microsoft, and Google in the public cloud space where one provider amasses a huge stockpile of computing, storage, and networking gear and rents it out to customers. Some companies prefer private clouds when they build their own non-shared infrastructure to offer the same ability to add and delete resources as needed. In the past few years, Joyent had stepped up its emphasis on containers — a buzzy way to deploy modern applications either on-premises or on private or public clouds. Joyent was founded in 2004 and has garnered about $126 million in funding from Intel Capital and others. It was a leading proponent of Node.js, a popular computer programming language, and has expertise in object storage as well. Samsung, the South Korean consumer electronics giant, said that Joyent will give it its own cloud platform to support Samsung’s lineup of mobile, Internet of Things (IoT) and cloud-based software and services.

Snagajob Buys PeopleMatter

Job board Snagajob will acquire applicant tracking system provider PeopleMatter. Snagajob, based in Glen Allen, Va., focuses on hourly paid jobs. The company says it works with more than 200,000 employers. PeopleMatter is focused on the service industry and serves more than 47,000 locations. It is based in Charleston, SC. Combined, the company will offer tools that include candidate sourcing, screening, tracking, scheduling, performance management and more, according Snagajob and PeopleMatter.


> 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/