IT Industry News – June 2018

June 2018 saw a fair bit of M&A activity, the biggest deal seeing Synnex pay $2.43 billion for call centre company Convergys and AT&T pay $1.6 billion for advertising tech company AppNexus. Palo Alto Networks is paying $300 million for Security company Evident.io; PayPal is shelling out $120 million for fraud detection startup Simility; Splunk is paying $120 million for incident management platform company VictorOps; Ribbon Communication is paying $120 million for Edgewater Networks; and Sharp is paying $36 million for Toshibas PC business. Other companies out shopping include Cisco who bought WiFi analytics company July Systems; IBM bought maintenance and repair company Oniqua and Shopify bought app company Return Magic.

Skills shortages were a theme around the world as hiring plans in most countries are positive. Confidence is high in many economies, including Canada’s despite the storm clouds surrounding NAFTA negotiations and the trade war with the US. Speaking of the US, their economy continues to roll along with very favorable indicators almost everywhere.

In this Issue:

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


> GENERAL INTEREST

General

Employers around the world reported optimistic hiring outlooks in the third quarter of 2018, according to the latest ManpowerGroup Employment Outlook Survey which showed that employers in 43 of 44 countries plan to add staff. ManpowerGroup’s survey showed that hiring confidence is strongest in Croatia, Taiwan, Japan, Hungary and the US.

Almost half of senior leaders in financial services have identified skills shortage as their greatest worry over the next twelve months, according to research from Robert Half Financial Services. Robert Half’s research explored key external and internal concerns facing the industry, including the impact of tightened regulation controls, new business processes, and training and development for employees.

The Economy – Canada

Employment in Canada was little changed in May, edging down by 7,500 jobs from April to a total of almost 18.6 million jobs, according to seasonally adjusted numbers from Statistics Canada. A loss of 31,000 part-time jobs in May offset a gain of 23,600 full-time jobs. On a year-over-year basis, May employment increased by 238,200 jobs on a gain of 289,700 full-time jobs and a loss of 51,500 part-time jobs.
The unemployment rate remained at 5.8% in May for the fourth consecutive month.

Canada’s real gross domestic product edged up 0.1% in April from March. This increase follows gains of 0.3% in March and 0.4% in February. Bloomberg reported Canada’s economy showed unexpected strength in April on a sharp pick up in manufacturing and a rebounding real estate sector. Economists had been expecting a flat reading due to the impact of poor weather conditions in April and following a disappointing run of economic data for the month. With advance in April, economic growth is on track to exceed 2% on an annual basis in the second quarter.

The Canadian staffing index, which measures staffing activity in Canada, edged down 1% in May on a year-over-year basis to a reading of 109. On a month-over-month basis, the index rose 2% in May.

Canadian employers continue to be confident in the economy, according to the third-quarter Employment Outlook Survey from Manpower. Canadian organizations plan to add staff across all 10 industry sectors in the third quarter. The Canada survey found 20% of employers expect to increase staffing levels and 3% anticipate cutbacks. This results in a net employment outlook of 13% on a seasonally adjusted basis, compared to 9% for the year-ago quarter.

The Canadian economy is gaining momentum despite looming concerns over US-imposed tariffs, according to the RBC Economic Outlook quarterly report. While not nearing the 3.0% growth pace of 2017, real GDP is expected to grow by 2.0% in 2018 before slowing slightly to 1.8% in 2019.

The Economy – US

Businesses struggle to fill open positions as many states have more job openings than available skilled workers, according to ManpowerGroup’s Talent Shortage Survey. Almost half of US employers surveyed, 46%, said they can’t find the skills they need — up from 32% in 2015 and maintaining the highest level recorded since 2006.

Month-over-month, the ASA Staffing Index edged up 0.6% to a rounded value of 98 for the week. This marks the strongest reading for this particular week since 2007, right before the Great Recession.

The Conference Board’s consumer confidence index decreased in June, following an increase in May. The index fell to a reading of 126.4 (1985=100) from 128.8 in May. Consumer assessment of present-day conditions was relatively unchanged, suggesting that the level of economic growth remains strong. While expectations remain high by historical standards, the modest curtailment in optimism suggests that consumers do not foresee the economy gaining much momentum in the months ahead.

Consumers’ outlook for the labour market was slightly more favorable. The proportion expecting more jobs in the months ahead increased marginally to 20.0% from 19.7%, while those anticipating fewer jobs decreased to 12.6% from 13.1%. The number of consumers stating that jobs were “plentiful” decreased to 40.0% in June from 42.1% in May, but those claiming jobs are “hard to get” also decreased to 14.9% from 15.6%.

Senior managers plan to add more tech talent in the second half of 2018 as security, cloud and digital projects in US companies expand, according to research released by Robert Half Technology. Sixty percent of IT hiring decision-makers surveyed plan to expand the size of their teams between now and the end of the year.

The Conference Board’s US Leading Economic Index edged up 0.2% in May to a reading of 109.5 (2016 = 100), following increases of 0.4% in both April and March. “While May’s increase in the U.S. LEI was slower than in recent months, the improvements in a majority of its components offset the declines in leading indicators of labour markets and residential construction,” said Ataman Ozyildirim, director of business cycles and growth research at The Conference Board. “The US LEI still points to solid growth but the current trend, which is moderating, indicates that economic activity is not likely to accelerate.”

Economic activity in the manufacturing sector expanded in May at a faster pace than in April, according to the Institute for Supply Management’s purchasing managers index for US manufacturing. And the panel of firms taking part in the report indicated production and employment continue to expand despite labour and skill shortages.
May’s index reading was 58.7, up from April’s reading of 57.3. Any reading above 50% generally indicates improving conditions.

Optimism about the US economy tempered among certified public accountants who hold leadership positions in their companies — such as CEO, CFO or controller — since the last quarter, according to the second-quarter Economic Outlook Survey released by the American Institute of CPAs. However, hiring plans continue to improve. Seventy-four percent of the CPA executives surveyed said they were optimistic about the economy over the next 12 months, down from 79% in the first-quarter survey. The decline was partially attributable to concerns about trade and political uncertainty, survey respondents said. Business executives’ optimism about the outlook for their own organizations also edged down one percentage point to 70%. However, both sentiments fall in the uppermost range of post-Great Recession assessments.

The Conference Board’s Employment Trends Index decreased in May, after five consecutive monthly gains. The index fell to a reading of 107.69 in May, down from a downwardly revised reading of 108.00 in April. However, the change still represents a 3.9% gain in the index compared with May 2017.

Economic activity in the US nonmanufacturing sector accelerated in May, according to the Institute for Supply Management’s nonmanufacturing index. ISM’s nonmanufacturing index rose in May to a reading of 58.6 from April’s reading of 56.8. Readings above 50 generally indicate improving conditions.

Hiring in the oil and energy industry rose by 5.2% over the past year as the industry rebounded from its trough in mid-2016 and oil prices reached their highest level since December 2014, according to LinkedIn’s new Workforce Report. Overall, hiring across all industries was up 4.5% in May when compared to the same month a year ago.

The number of IT jobs in the US edged up 0.03% in May from April to a total of more than 5.3 million, the TechServe Alliance announced. With the unemployment rate for the overall workforce at historic lows and IT occupations at levels economists would unequivocally deem to be “full employment,” the shortage of IT professionals has become acute. On a year-over-year basis, IT employment rose by 0.87% in May, an increase of 44,900 IT workers.

Estimated first-quarter growth in real GDP for the US was lowered to an annual rate 2.0% in a “third” estimate released today by the US Bureau of Economic Analysis. Its previous estimate put growth at an annual rate of 2.2%. MarketWatch reported that economists it polled had predicted the real GDP for the first quarter would be unchanged. However, it’s believed the second quarter will reflect much faster growth. Real GDP rose 2.9% in the fourth quarter, according to the Bureau of Economic Analysis.

The Conference Board’s US Leading Economic Index edged up 0.2% in May to a reading of 109.5 (2016 = 100), following increases of 0.4% in both April and March.

Workers’ confidence in the US is nearing its highest level ever and continuing a year-long trend of positive progression. Staffing provider Yoh and HRO Today magazine reported their quarterly Worker Confidence index rose to a level of 107.1 in the first quarter, up from a reading of 103.2 in the fourth quarter and the second-largest quarter-over-quarter increase in the index’s history.

US employers’ hiring outlooks remain strong for the third consecutive quarter, according to the latest Manpower Employment Outlook Survey. The US ranked among the strongest outlooks for hiring among the 44 countries surveyed in the report. Other countries with solid hiring outlooks included Croatia, Taiwan, Japan, Hungary.

The Economy – Outside North America

London (UK) is the most popular city in the world to work in, remaining a financial and technology hub; however, the rest of the UK falls behind in attracting global talent, reports Business Leader citing data from Gibbs Hybrid and Boston Consulting Group. The falling attractiveness of the UK to foreign talent is worrying, as less than half of UK executives believe they have the digital skills to lead their organisation in the digital economy.

The euro area (EA19) seasonally-adjusted unemployment rate stood at 8.5% in April 2018, down from 9.2% in April 2017. This is the lowest rate recorded in the euro area since December 2008, according to data from Eurostat, the statistical body of the European Union. The EU28 unemployment rate fell to 7.1% in April 2018, from 7.8% in April 2017. This is also the lowest rate recorded since September 2008.

Japan’s seasonally-adjusted unemployment rate stood at 2.2% in May, down 0.3% when compared to the same period last year and the joint-lowest level since October 1992, according to data from Statistics Japan. The number of unemployed persons in May 2018 was 1.58 million, a decrease of 520,000 when compared to the previous year.

There were 74,000 more South Africans employed in the quarter ended March 2018 when compared to the same period last year, according to data from Statistics South Africa. An increase of 0.8%. The gain in employment was largely due to increases in the following industries: community services, which was up 3.0% compared to the previous year, trade (1.1%), and business services (0.7%). Meanwhile, the electricity industry remained unchanged.

Singapore’s labour market improved slightly in the first quarter ended March 2018, supported by sustained expansion in economic activity, according to the Ministry of Manpower’s Labour market report. The seasonally adjusted unemployment rate declined to 2.0% in Q1 2018, from 2.1% in the previous quarter. It also declined for residents (3.0% to 2.8%), and remained unchanged for citizens (3.0%). The seasonally adjusted resident long-term unemployment rate declined from 0.8% in the fourth quarter to 0.7% in the first quarter of 2018.

Hong Kong’s seasonally adjusted unemployment rate stood at 2.8% in the period from March to May 2018, same as that for the period from February to April 2018, according to data from the Census and Statistics Department. The number of unemployed persons (not seasonally adjusted) decreased from 112,900 in the February to April 2018 period to 112, 300 in March to May 2018 period.

The unemployment rate in Malaysia fell to 3.3% in April 2018, down by 0.1% compared to 3.4% in April 2017, according to data from the Department of Statistics Malaysia. There were 510,000 unemployed people in April compared with 511,900 a year earlier.


> MERGER & ACQUISITION ACTIVITY

Synnex Paying $2.43 Billion for Convergys

IT distributor Synnex unveiled plans to acquire call center king Convergys in a deal valued at $2.43 billion. Synnex officially unveiled the acquisition just as it was preparing to brief financial analysts on the distributor’s second fiscal quarter 2018 financials. The acquisition will actually be done by Synnex’s Concentrix division, with Concentrix and Convergys expected to be integrated into a single business.
Concentrix is a wholly-owned subsidiary and top global provider of customer engagement CRM BPO services. With the deal, Synnex said it expects mid-single digits non-GAAP earnings per share accretion in the first year, and double digits in the second year, along with cost synergies of $50 million in the first year and a minimum of $150 million by the third year.

AT&T Paying $1.6 Billion for AppNexus

AT&T plans to buy advertising technology company AppNexus in a deal that will propel the growth of the carrier’s advertising platform and combine ad technology with AT&T’s content portfolio. AppNexus today offers a global advertising marketplace and provides enterprise products for digital advertising for publishers, agencies and marketers. Together, AT&T hopes to strengthen its TV advertising strategy. The Wall Street Journal reported last week that AT&T was planning to offer $1.6 billion for AppNexus. AT&T said that AppNexus’ technology will integrate with the carrier’s premium video content and distribution platforms. The technology will also help to extend AT&T’s advertising and analytics footprint globally into Asia-Pacific, Australia, Europe, and Latin America.

Palo Alto Networks Paying $300 Million for Evident.io

Palo Alto Networks has agreed to purchase Evident.io for $300 million to make it easier for enterprise cloud users to keep their deployments are compliant and secure. The Santa Clara, Calif.-based platform security vendor said Pleasanton, Calif.-based Evident.io will extend its API-based security capabilities by analyzing services and account setting configurations against strict security and compliance controls. The deal is expected to close by April 30, with Evident.io’s co-founders joining Palo Alto Networks.

PayPal Paying $120 Million for Simility

PayPal announced it was buying machine learning-powered fraud detection startup Simility. The transaction is valued at $120 million, in what will be an all-cash deal. The news comes two days after PayPal bought out payments startup Hyperwallet in a $400 million deal. Founded in 2014, Palo Alto-based Simility leverages machine learning to help those working in the fraud detection sphere collect and analyze data. This deal will allow PayPal to leverage Simility’s fraud prevention and risk management smarts for its own customers around the world.

Splunk Paying $120 Million for VictorOps

Big data-crunching platform Splunk has announced plans to acquire VictorOps, an incident management platform for the DevOps community. For the uninitiated, Splunk captures machine-generated data for the purpose of generating insights and “operational intelligence” through reports and visualizations. It basically gives businesses a broad view of their operations and helps them spot patterns and solve problems. Founded out of Boulder, Colorado, VictorOps launched out of stealth way back in 2012, serving as a platform that helps developer teams manage their software infrastructure. The platform is designed to keep everything working 24/7 through an automated system that gets the right alert to the right person, at the right time. It’s all about maximizing uptime and minimizing technical glitches.

Ribbon Communication Paying $110 Million for Edgewater Networks

Ribbon Communications will leverage its $110 million acquisition of Edgewater Networks to create a complete core-to-edge portfolio as well as a fully integrated software-defined WAN service. Edgewater, which generated $64 million in revenues in 2017, also owns a SD-WAN service that Ribbon plans to integrate to give customers a new, complete solution for the small and medium enterprise market. Founded in 1997, Ribbon provides cloud-based unified communications architectures to customer in more than 25 countries.

Sharp Paying $36 Million for Toshiba’s PC business

Toshiba has reached an agreement to sell the majority of shares in its PC business subsidiary, Toshiba Client Solutions, to Sharp for $36 million. The Toshiba PC brand is also expected to continue under Sharp’s ownership. “Following the share transfer, Toshiba will continue to provide brand licensing for PC products and equipment designed, manufactured and sold by TCS,” Toshiba said in a news release. “TCS will continue to provide its customers around the world with products and services that reflect their needs.”

C Spire Buys TekLinks

Southeastern regional telecom provider C Spire is acquiring TekLinks Inc. one of the top managed service providers in the country, in a deal that instantly creates a nationwide end-to-end hybrid IT services powerhouse that can design, implement and deliver a full suite of IT services for enterprise customers both on and off premises. The deal makes the combined company the top end-to-end IT enterprise services provider in the Southeast with over 500 services professionals, four owned and operated data centers with space in others, and 8,000 miles of fiber network serving business customers.

Dimension Data Buys e2y

Dimension Data said it acquired London-based solution provider e2y for an undisclosed sum to fill a hole in its digital commerce portfolio with an award-winning consultancy, the company told CRN. e2y — which has a strong presence in the UK and Europe — works in platform adoption and integration, and uses technology to enhance the user experience around digital commerce, to generate growth for its clients. Gibson said this adds a complementary set of skills to Dimension Data’s core business of systems integration, managed services and digital infrastructure consulting. Dimension Data — a Johannesburg-based solution provider — employs 28,000 people in 47 countries around the world, in consulting, technical support, and fully managed IT services.

Cisco Buying July Systems

Cisco Systems says it will acquire July Systems, a cloud-based location services software platform vendor based in Burlingame, Calif. Privately held July Systems uses Wi-Fi analytics to allow retail stores, hotels, convention centers and other large facilities to gain insights into their customers. The July Systems solution is cloud-based and sold on a subscription basis. With July Systems, San Jose, Calif.-based networking giant Cisco said it will evolve its location services business, and will continue to support and market Cisco Connected Mobile Experiences. Cisco has partnered with July Systems for a number of years as an OEM for mobile experiences, as well as Meraki.

IBM Buying Oniqua

IBM is making a larger play in the industrial Internet of Things space with its acquisition of Oniqua Holdings Pty Ltd., a Denver-based provider of maintenance, repair and operations inventory optimization software for manufacturing, mining and other asset-intensive industries. The deal will give IBM Services, the company’s solution provider arm, a team of professionals from Oniqua who are experts in maintenance, repair and operations inventory optimization, as well as data engineering, data science and predictive and prescriptive analytics.

Shopify Buys Return Magic

Shopify has acquired another app for its ever-expanding portfolio, by acquiring the Montreal-based developers behind Return Magic, an ecommerce return solution for Shopify that also happens to be the platform’s number one app, with nearly 2500 customers. Terms of the acquisition were not disclosed, but Shopify general manager of shipping Louis Kearns told ITBusiness.ca that four members of the Return Magic team, including co-founder and CEO-turned-Shopify product lead Guillaume Racine and co-founder and CTO-turned-senior engineering lead Raff Paquin, would be joining Shopify’s Montreal team next month, and “continue to expand on the technology they have been building since founding [Return Magic] in November 2016.”