IT Industry News – May 2017

A Little History of May in previous years 

Five years ago, in May 2012, Facebook went public and there was a fair amount of M&A activity. The largest deal saw SAP’s $4.3 billion acquisition of Ariba, with CGI’s $2.8 billion acquisition of Logica PLC of particular interest to those of us here in Canada! EMC continued its pattern of acquisitions with the $430 million purchase of XtremIO; perennial acquirer Oracle paid $300 million for social media marketing firm Vitrue; in the storage space Seagate, paid $186 million for a controlling interest in LaCie; Microsoft invested $300 million in a Barnes & Noble subsidiary; and LinkedIn paid $118 million for Slideshare. There was plenty more activity, but with the amounts not published. Twitter bought RestEngine; IBM bought customer analytics company Tealeaf Technology; VMware bought Wanova; and Cisco bought Truvisco.

In May 2013, Yahoo purchased Tumblr for $1.1 billion. The $6.9 billion deal to take BMC Software private did not cause the same kind of splash — the power of the brand? Manitoba Tel decided to shed its Allstream division to a holding company for $520 million; McAfee paid $389 million for Finnish security firm Stonesoft; Dell added to its cloud capabilities with the purchase of Estratius; AVG bought PrivacyChoice; and Ottawa based N-Able Technologies became one more Canadian company to be bought by a larger US company, this time Solarwinds for $120 million.

In May 2014, AT&T paid $50 billion for DirectTV and Apple paid $3 billion for Beats. Google continued to invest in its Android strategy, this time with a strategy company, Divide, that would bring help breaking into the enterprise. Other acquisitions saw Seagate pay $450 million for some flash capability from Avago (the LSI divisions); GE bought cyber security firm Wurdtech; EMC bought a flash (see the trend) start-up DSSD; Time Warner bought Youtube video network FullScreen; and SAP bought behavioral target marketing company SeeWhy.

May 2015 saw some very large deals on the M&A front, with the biggest seeing Charter Communications spend $55 billion to buy Time Warner Cable and a further $10.4 billion to buy Bright House Networks. This creates the second largest cable company in the US, just behind Comcast. The “billion-dollar club” also saw French Telco Altice pay $9.1 billion for another US cable company Suddenlink Communications. Keeping with the billion dollar deals involving telcos, Verizon paid $4.4 billion for AOL to bolster its mobile video capabilities. Another billion dollar deal saw HP unload 70% of its stake in its China server, storage and technology storage unit to Tsinghua Holdings for $2.3 billion. The final billion-dollar deal saw EMC pay $1.2 billion for cloud service provider Virtustream. Apple was out buying a couple of companies in May, snapping up mapping company Coherent Navigation and augmented reality company Metaio. In other deals, Avaya bought cloud technology company Esna; and Cisco bought cloud programming interface company Tropo.

May 2016 saw some M&A activity with the largest deal seeing HPE merge its services arm with CSC in a $8.5 billion deal to create arguably the largest IT services company. In another large deal, Vista Equity Partners paid $1.79 billion for customer service and marketing cloud provider Marketo. There were some other big names out shopping in May too. Oracle paid $532 million for software as a service for the utilities vertical, company Opower; Google picked up interactive training platform Synergyse; Infor bought consulting services company Merit Globe AS; and ARM paid $350 million for imaging and embedded systems company Apical. Microsoft ended an unhappy period by divesting its feature phone business to FIH mobile for $350 million, and GoDaddy picked up cloud-based phone company FreedomVoice for $43 million. New Signature picked up another Microsoft solution provider, Dot Net Solutions; and Edmonton-based F12.Net bought Calgary-based professional services company XCEL.

Which brings us back to the present

The most significant purchase in May 2017 was the $1.86 billion sale of CenturyLink’s data centres and colocation business to a consortium led by BC Partners, Medina Capital Advisors and Longview Asset Management. Cybersecurity startup, Hexadite, was bought by Microsoft for $100 million. Goldman Sachs entered the BI space by purchasing a minority stake in Information Builders of New York City. Apple acquired Beddit, a Finnish sleep sensor product, for an undisclosed amount. Finnish cybersecurity firm, F-Secure acquired British security consultants, Digital Assurance also for an undisclosed amount.   

In other news, increasing smartphone sales around the world are not coming from tech giants like Apple and Samsung. Chinese smartphone makers are on the rise and gaining significant market share at home and in other densely populated countries.  

industry-news-2017

In this Issue:

> General Interest
> Merger & Acquisition Activity
> Primary Sources


> GENERAL INTEREST

Apple’s smartphone sales were flat in Q1 of 2017 after declining through most of 2016. Samsung has experienced a significant decrease in sales during Q1 of 2017. Chinese smartphone companies like Huawei, Oppo, and Vivo are taking market share in China where the majority of growth and development of smartphones occurs. Companies like these are also making strategic moves into other large smartphone markets such as India.  

The economy – Canada

Statistics Canada reported the unemployment rate fell to the lowest rate since October 2008 at 6.5%. In April, total employment in Canada was 18.3 million. Both full-time and part-time employment rose year-over-year with full-time up by 1.3% and part-time up by 2.5%.

Canadian real GDP increased 3.7% (expressed at an annualized rate) in Q1, according to Statistics Canada.

According to the Conference Board of Canada’s Provincial Outlook: Spring 2017, all provinces, with the exception of Newfoundland and Labrador, will experience positive economic growth in 2017. It is anticipated Alberta and Saskatchewan will see the most economic growth, followed by British Columbia whose real GDP is forecast to reach 2.5% this year. Ontario’s real GDP is projected to increase by 2.3%. As for the Atlantic provinces, Prince Edward Island has the healthiest growth potential with a forecasted increase in real GDP of 1.8%.

Employment growth and an increase in the population in Toronto are two factors that will lead to Toronto’s expected GDP growth of 2.6% this year according to the Conference Board of Canada’s Metropolitan Outlook: Spring 2017.

The Ontario Government announced plans to increase the minimum wage to $15 per hour by 2019.     

In a recent survey by Robert Half International Inc., 43% of Canadians said they will look for a new job in the next year mainly due to inadequate salary and benefits. Employers were more inclined to believe employees would resign due to limited growth potential.  

The economy – US

In April, the Conference Board’s US Leading Economic Index rose to 126.9 (2010=100), which was only a 0.3% increase.

Online job advertisements decreased by 26,100 in April according to the Conference Board. Sales and office and administrative support ads experienced the largest decrease, while education, training and libraries, healthcare practitioners, technical, and installation, maintenance and repair ads all increased.

Consumer confidence has declined to a reading 117.9 (1985=100) in May down from 119.4 in April according to the Conference Board’s Consumer Confidence Index.

The Conference Board’s US Employment Trends Index indicates that the tight labor market in the US is about to get tighter with reports of an increase to a reading of 132.64 in April. This represents an increase of 4.1% from the same month in 2016.

According to the ADP National Employment Report, US private-sector employment increased by 177,000 jobs in April. This is a significant decrease from March where 255,000 jobs were added and indicative of a tightening US labor market.

The four-week moving average of initial claims for unemployment decreased by 2,750 according to the US Department of Labor. The Department also reported the US added 211,000 jobs in April.

According to the US Commerce Department, real GDP increased 2.1% in the Q4 of 2016 and grew at an annual rate of 1.2% in Q1 of 2017.

ADP has released research indicating that over half of a company’s workforce may be open to switching jobs with 17% actively seeking new jobs and 46% passively looking. Job switching has reached a new high with 27% of employees changing jobs annually.    

A survey conducted in the US by Harris Poll on behalf of CareerBuilder indicates 41% of employers plan to hire seasonal employees, which is 12% increase from last year. Summer jobs range from the standard recreation and outdoor labour positions to engineering, IT, office support, sales, manufacturing, banking, retail, etc.

The Institute for Supply Management’s Nonmanufacturing Index rose to 57.5 in April, up from 55.2 in March. The employment portion of the index declined slightly from 51.6 to 51.4.

Institute for Supply Management’s Purchasing Manager’s Index for US Manufacturing fell from 57.2 in March to 54.8 in April. The employment portion of the index fell significantly from 58.9 in March down to 52.0 in April.

The economy – Outside North America

The Economic Times published data from Naukri indicating a 24% decline in the IT and software industry in India. In April, overall hiring was down 11% compared to April 2016. Other sectors that experienced a decline include telecom, BPO, insurance and construction.

According to the Economic Times, India will experience 175,000 and 200,000 job cuts annually in the IT sector over the next three years.

In the TeamLease Employment Outlook Report published by Mint, the hiring outlook in India declined by 6% to 89% with the lowest hiring sentiment across small businesses. Despite the decline in hiring outlook, hiring sentiment in the IT sector is up 4% and 5% in financial services.     

Research conducted by the India Labour Bureau published in the Times of India indicated the number of jobs in India increased by 1.1% and economic growth remained static at 7% at the end of April. 230,000 jobs were added in the following sectors: manufacturing, construction, trade, transport, accommodation and restaurants, IT/BPO, education and health.  

In the most recent TimesJobs RecruiteX Recruitment Index, the demand for talent in real estate and construction in India increased by 3%.

The Australian Bureau of Statistics reported that the seasonally adjusted unemployment rate in Australia in April remained static at 5.8%. Part-time jobs increased by 49,000 while full-time jobs decreased by 11,600.

According to data released by the Office for National Statistics, the employment rate in the UK has reached 74.8%, its highest point since 1971. The unemployment rate went down to 4.6%, its lowest point since 1975.

In April, the Morgan McKinley Employment Monitor indicated a significant decline in the number of jobs available and the number of professionals seeking jobs in London, 15% and 49% respectively.

The Markit/Recruitment and Employment Confederation Report on Jobs indicated a slower increase in permanent jobs in the UK while candidate availability decreased. In April, growth in starting salaries for permanent jobs fell to a four-month low. Demand for public sector staff decreased while it rose sharply for private sector staff for both permanent and temporary jobs.  

According to the Morgan McKinley Ireland Employment Monitor, professional job vacancies increased by 7% in April while the number of professionals seeking jobs decreased by 2%. The increase in vacancies is due, in part, to increased recruiting in the financial services and professional services sectors.

Reuters reported that China added 4.65 million new jobs in Q1. The government in China plans on creating 11 million new jobs this year.

Statistics Korea reported the unemployment rate in South Korea stands at 4.2% – the highest rate in 17 years with 1.17 million unemployed people. The unemployment rate is partially attributed to an increase in South Korea’s labour force population.  

Data published by the State Secretariat for Economic Affairs indicated that the jobless rate in Switzerland decreased to 3.3% in April when compared to the same period last year. The number of people registered as employed increased by more than 3,000.

Statistics New Zealand reported that New Zealand’s employment rate increased to 67.1% in Q1. The seasonally adjusted jobless rate decreased to 4.9% down from 5.2% in Q4 2016.

In Germany, the Labour Market Barometer issued by the Institute for Labour Market and Professional Research remained static at 104.4 points from March.

According to the Labour Market Advance Release First Quarter 2017 report released by the Ministry of Manpower the overall unemployment rate in Singapore went up 0.1% to 2.3% and total employment declined by 8,500 in Q1.

According to the Hong Kong Census and Statistics Department, unemployment in Hong Kong remained static from February to April at 3.2%. The Department reported the labour force declined and employment decreased to 3.81 million in February to April 2017 from 3.82 million. The underemployment rate remained static at 1.2%.

The Directorate General of Budget, Accounting and Statistics reported total employment in Taiwan in April was 11.3 million, an increase of 83,000 compared to the same period in 2016. The number of unemployed decreased by 19,000 down to 432,000 in April compared to this time last year.


> MERGER & ACQUISITION ACTIVITY

Consortium Pays $1.86 billion for CenturyLink Data Centres

A consortium of BC Partners, Medina Capital Advisors and Longview Asset Management purchased global communications and IT services company CenturyLink’s data centres and colocation business for $1.86 billion in pre-net cash proceeds. The acquisition gives CenturyLink a 10% equity stake in Cyxtera Technologies, the consortium’s global secure infrastructure company. Cyxtera will take over the 57 data centres in CenturyLink’s portfolio, which includes 700 employees. CenturyLink intends on using the proceeds of the sale toward their plans to acquire Level 3 Communications.  

Microsoft Reportedly Acquires Hexadite

Calcalist reported that Israeli cybersecurity startup, Hexadite has been acquired by Microsoft for a rumored $100 million. Hexadite’s cybersecurity software swiftly identifies and addresses cybersecurity attacks when they occur. Microsoft has already acquired a few other cloud-focused cybersecurity companies including Secure Islands and Team8 to strengthen its portfolio.    

Goldman Sachs Purchases Minority Stake in Information Builders

Private capital investment group, Goldman Sachs has purchased a minority stake in Information Builders, a business intelligence vendor based out of New York City. Goldman Sachs has now joined the BI space, which is projected to be worth $27 billion in the next 4 years. Goldman Sachs was attracted to Information Builder’s data integration capability and data quality, their strong reputation in the market place and roster of customers. The investment provides Information Builders with some of the financial backing required for its long-term plans for growth.

Apple Buys Beddit

Beddit, the “Fitbit for sleep”, which has been available in Apple stores since 2015, has been acquired by Apple. Beddit is a sleep sensor that measures snoring, how long and efficiently the user sleeps, heart rate, breathing, temperature, movements, and the room’s temperature and humidity. Apple’s acquisition of Beddit is indicative of the growing interest in user health among the tech community.  

F-Secure Purchases Digital Assurance

In its third acquisition of 2017, Finnish cybersecurity firm, F-Secure bought British IT security consultants Digital Assurance. This strategic acquisition will help F-Secure develop its portfolio of UK clients. With Digital Assurance, F-Secure has acquired security testing and evaluation services for devices and systems as well as policy and risk assessment consulting.


> PRIMARY SOURCES:

IT World Canada
TechRepublic

ZDNet

Information Week

Staffing Industry Analysts


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