IT Industry News – November 2018

November 2018 was a busy month in the M&A space, with lots of action! The largest deal saw SAP shell out $8 billion for experience management company Qualtrics. Not far behind was Commscope paying $7.4 billion for telecommunication equipment maker Arris. Vista Equity partners paid $1.94 billion for cloud software company Apptio; and private equity fund CVC paid $1.8 billion for a global IT and managed services provider, ConvergeOne Holdings. The final billion-dollar deal saw Blackerry make its largest acquisition to date, paying $1.4 billion for AI cybersecurity startup Cylance.

In other deals, Thoma Bravo bought security testing vendor Veracode for $950 million; LinkedIn paid $400 million for a surveying startup, Glint; power management company Eaton is paying $300 million for Turkish company Ulusoy Elektrik; and Citrix shelled out $200 million for intelligent portal company Sapho.

There were plenty of big name companies out shopping with no price tag named, Accenture bought a German design agency Kolle Rebbe; Apple bought AI company Silk Labs; HPE bought big data company Bluedata; Oracle bought Talari Networks; Cisco bought networking company Ensoft; Microsoft bought another AI company, startup XOXCO; Red Hat (recently purchased by IBM) bought storage startup NooBaa; VMware bought Kubernotes startup Heptio; Symantec bought a couple of companies — Appthirty and Javelin Networks; and DXC bought a couple of companies — TESM and BusinessNow.

If that wasn’t enough action for one month, Amazon announced it would be investing $5 billion into its new headquarters in New York City and Arlington Virginia; Marriott announced a data breach that affects 500 million guests; and Facebook also announced a security breach affecting 50 million users!

The job news around the world seems to generally be one favouring the job seeker, with of tightening labour markets. There are of course exceptions and Brexit seems to be taking its toll in the UK.

In this Issue:

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


> GENERAL INTEREST

General

A baby bust is spreading across the globe. Close to half of the world’s nations are not producing enough babies to sustain their current population levels, according to new research published in The Lancet. Between 1950 and 2017, the global fertility rate declined from 4.7 children per woman to 2.4. When the rate drops below 2.1, populations begin to shrink. The shift could pose significant social and economic challenges in the decades ahead, as the ranks of grandparents exceed that of grandchildren, BBC reports.

The economy – Canada

Employment in Canada rose by 11,200 jobs with a gain of 33,900 full-time jobs, which was partially offset by a loss of 22,600 part-time jobs, according to seasonally adjusted numbers from Statistics Canada. The unemployment rate edged down to 5.8% from 5.9% in September.

Canada’s real gross domestic product edged up 0.5% in the third quarter, following a 0.7% increase in the second quarter. Expressed at an annualized rate, real GDP rose 2.0% in the third quarter; in comparison, real GDP in the US rose at an annualized rate of 3.5%.

The economy – US

The manufacturing industry’s pre-existing workforce crisis could get even worse according to a new 2018 skills gap study released by Deloitte and The Manufacturing Institute — the social impact arm of the National Association of Manufacturers. The widening manufacturing skills gap is expected to grow from about 488,000 jobs left open today to as many as 2.4 million manufacturing jobs in 2028. In turn, $454 billion in manufacturing GDP could be at risk in 2028, or more than $2.5 trillion over the next decade, according to the research.

Economists raised their estimates for job gains this year and in 2019 but kept their outlook for the unemployment rate mostly unchanged, according to the fourth-quarter Survey of Professional Forecasters from the Federal Reserve Bank of Philadelphia. The economists expect the unemployment rate to average 3.7% in this quarter as well as the first quarter of next year, unchanged from the previous forecast.

The Conference Board’s US Employment Trends Index rose in October, following a decrease in the prior month. The index in October rose 4.6% year over year to a reading of 110.72, up from the downwardly revised reading of 110.39 in September.

Economic activity in the US nonmanufacturing sector decelerated in October, according to the Institute for Supply Management’s nonmanufacturing index, released today. ISM’s nonmanufacturing index fell to a reading of 60.3 in October from a reading of 61.6 in September. Readings above 50 generally indicate improving conditions.

IT employment decreased in October from September after years of continuous month-over-month growth, the TechServe Alliance announced. The number of IT jobs in the US edged down 0.02% to a total of approximately 5.34 million, according to the group, which serves as the national trade association of the IT and engineering staffing and solution industry. However, on a year-over-year basis, IT employment was still up by 0.35% in October with 18,400 more IT workers than the previous year.

The TechServe Alliance also measures engineering employment, which edged up by 0.23% in October from September. Engineering employment rose 2.39% on a year-over-year basis, an increase of 61,000 engineering workers.

Executives are optimistic about their businesses growth in 2019 but concerned about a shortage of available talent, according to the Employer Associations of America’s 2018 National Business Trends Survey. Nearly 74% of executives surveyed described their projected 2019 business outlook as a slight to significant increase in sales/revenue. And more than half, 54%, reported they plan to hire permanent staff in 2019, with 72% hiring to fill newly created jobs.

US employers plan to hire 16.6% more college grads from the class of 2019 than they did from the prior year’s class, according to the fall Job Outlook 2019 survey released by the National Association of Colleges and Employers. This year marks the best initial hiring outlook since the class of 2007 and follows an outlook in spring of last year that reported an overall hiring decrease of 1.3% for class of 2018 graduates.

Bloomberg reported the US labor market has little room to tighten, according to a new study from the Federal Reserve Bank of San Francisco that examines trends in the number of Americans who are either working or looking for jobs. “Our estimates indicate that the aggregate labor force participation rate is at its trend as of 2018,” the regional Fed bank concluded in an Economic Letter. “Combined with the low unemployment rate, this argues that the US labor market is operating at or beyond its full potential.”

The Conference Board’s US Leading Economic Index edged up 0.1% in October from September to a reading of 112.1 (2016 = 100), following 0.6% increase in September, and a 0.5% increase in August. “The index still points to robust economic growth in early 2019, but the rapid pace of growth may already have peaked. While near term economic growth should remain strong, longer term growth is likely to moderate to about 2.5% by mid to late 2019.”

Economic activity in the manufacturing sector expanded in October at a slower pace than in September, according to the Institute for Supply Management’s purchasing managers index for US manufacturing. September’s index reading registered 57.7, down from August’s reading of 59.8. Any reading above 50% generally indicates improving conditions

US hiring growth has leveled out since the late summer, according to LinkedIn’s November Workforce Report. However, time will tell whether this is a temporary breather or a more sustained pause. Gross hiring in the US rose 3.8% year-over-year in September; seasonally adjusted national hiring remained steady, edging down just 0.3% from September to October 2018. LinkedIn noted the US labor market is tightening, which translates to growing national skills shortages and shrinking national skills surpluses. This is good news for workers with skills in high demand, but increasingly challenging for employers to seek out new talent pools to find workers with the skills they need.

Nearly one-third of organizations plan to hire more IT staff next year, according to the 2019 State of IT Careers report released by Spiceworks, a network that includes millions of IT professionals. The report shows 29% of organizations plan to hire more IT staff in 2019, and cybersecurity skills are the most in demand.

The Conference Board’s consumer confidence index decreased in November following an improvement in October. The index fell to a reading of 135.7 (1985=100), down from 137.9 in October. Despite the small decline, consumer confidence remains at historically strong levels.

US real gross domestic product grew at an annual rate of 3.5% in the third quarter, according to the second estimate of GDP growth released by the US Commerce Department. The new estimate is unchanged from the previous estimate.

The economy – Outside North America

The OECD (Organisation for Economic Co-operation and Development) unemployment rate fell by 0.1% to 5.2% in September 2018 when compared to August. Across the OECD countries, 33.1 million people were unemployed.

Global wage growth in 2017 fell to its lowest rate since 2008, according to a new International Labour Organisation (ILO) report. At the same time, women continued to be paid approximately 20% less than men, globally.

The EU28 unemployment rate stood at 6.7% in October 2018, down from 7.4% in October 2017, and the lowest rate recorded in the EU28 since the start of the EU monthly unemployment series in January 2000, according to Eurostat, the statistical office of the European Union.

Germany’s labour market boom continued in the third quarter with the number of people in employment reaching 45.04 million, the first time that quarterly figures have exceeded the 45 million mark since reunification in 1990, according to data from the Federal Statistics Office (Destatis).

The number of jobs available in London decreased by 33% in October when compared to a year ago, according to the London Employment Monitor report by recruitment firm Morgan McKinley. At the same time there was a 23% decrease in professionals seeking jobs.

The UK’s public sector faces up to seven more years of skills shortages based on current demand, according to a new report from the Recruitment and Employment Confederation. The REC’s report, ‘Public Sector 2025′, found that the public sector also faces stiff competition from the private sector especially for technology roles needed to maintain cyber security. The use of automation and artificial intelligence over the coming years will further increase the need to attract and retain technology and digital experts into the public sector.

Employers’ confidence in the prospects for the UK economy saw a slight improvement in November, but remained negative for the fourth successive month, according to the Recruitment and Employment Confederation’s latest JobsOutlook report. The net balance of those seeing a positive outlook as opposed to a negative one reached -11, a slight recovery from October’s balance of -14. Despite the ongoing negativity towards the prospects for the economy, employers’ confidence in making hiring and investment decisions in their own businesses remained in positive territory with a net balance of +16, a rise of 1% from the previous month.

Analysis in the UK shows that 50,000 staff have been made redundant or seen their role put under threat, with the bulk of them working for well-known high street chains. Very recently, House of Fraser has put more than 6,000 jobs at risk with its store closure plan, while Poundworld has plunged into administration, endangering a further 5,100. It comes after the collapse of Toys R Us and Maplin earlier this year. The same period also saw chains like Prezzo, Byron and Jamie’s Italian shut restaurants, culling hundreds of jobs. Retailers have been hammered by Brexit-fuelled inflation, soaring business rates, and falling consumer confidence.

Job application rates in the UK rose by 15% in October when compared to the previous month, according to data from job site CV-Library. The data found that that application rates outpaced job growth last month for the first time since January, with job vacancies rising by 11.6% compared to the 15% increase in application rates.

The availability of professional jobs in Ireland increased by 11% in October when compared to the same time last year according to data from the latest Morgan McKinley Irish Employment Monitor.

The Dutch labour market saw 271,000 jobs added in the year from the third quarter of 2017 to the third quarter 2018. This is the largest annual growth in jobs in 11 years, according to data from Statistics Netherlands. On a quarterly basis, the number of jobs increased by 60,000 in Q3. This is the eighth consecutive quarter in which the number of jobs increased by at least 50,000. A tense labour market means that the demand for labour is above average and the available supply is relatively low.

The Swiss-registered unemployment rate stood at 2.4% in October, down from 3.0% in October of last year according to the State Secretariat for Economic Affairs (SECO).
SECO found that there were 107,315 unemployed who were registered at the regional employment agencies, down by 20.4% compared to the same period last year.

The growth in Bulgaria’s outsourcing sector is set to lead to an increase of 18,400 new jobs within the sector over the next three years, according to an annual report from the Bulgarian Outsourcing Association. The report said that the outsourcing sector makes up 2.4% of the labour market in Bulgaria with 60,600 full-time employees. By 2021, the number of full-time employees in outsourcing will exceed 79,000. According to data from Eurostat, the unemployment rate in Bulgaria stood at 5.3% in September.

China’s job market remained stable in the first three quarters of 2018, reports the Ministry of Human Resources and Social Security. Approximately 11.07 million new jobs were created from January to September, 100,000 more than the same period a year ago. The registered unemployment rate in urban areas stood at 3.82% at the end of September, down slightly from 3.83% at the end of June.

New Zealand’s seasonally adjusted unemployment rate fell to 3.9% in the third quarter of 2018 from 4.4% the previous quarter, according to data from Statistics New Zealand. The rate in the third quarter is also the lowest unemployment rate since the June 2008 quarter, when it was 3.8%.

With a rapidly rising working age population, India would need approximately 100 million jobs by 2026, The Business Standard reports, citing data from PwC. Of these, approximately 80% or 78 million jobs new employment requirements over the next decade would need to be created in just ten Indian states. Over the next 15 years, India’s population will continue to grow younger before its starts ageing from 2034.

Japan’s unemployment rate edged down by 0.3% to 2.4% in October 2018 when compared to the same period last year, according to Statistics Japan.

Singapore’s labour market improved in the period from June 2017 to June 2018, employment has grown and the employment rate remained high for residents aged 25 to 64 at approximately 80%, and the rate continued to rise firmly for older residents aged 65 & over. The employment rate for older residents aged 65 & over increased from 25.8% in June 2017 to 26.8% in June 2018.

The overall hiring sentiment in India for the six-month period (H2) from October to March 2019 declined by 3% to 92%, according to the latest Employment Outlook from Indian staffing firm TeamLease. The 92% outlook is a decline from the previous six-months period’s 95% outlook.

Australia’s seasonally-adjusted jobless rate fell to 5.0% in October, down 0.5% when compared to the same period last year, according to data from the Australian Bureau of Statistics.

Hong Kong’s seasonally adjusted unemployment rate stood at 2.8% for the period from August to October 2018, same as that of the previous period from July to September 2018, according to figures from the Census and Statistics Department.


> COMPANY NEWS

Amazon ended more than a year of speculation when the company officially revealed two cities that will serve as its East Coast home: New York City and Arlington, Va. The Internet giant is reportedly busy finalizing plans to move into the Long Island City neighborhood of Queens, as well as the Crystal City area of Arlington, Va., near Washington, D.C. Amazon pledged that it will be investing $5 billion across both new headquarter locations in an effort to create more than 50,000 full-time jobs with more than 25,000 employees each in New York City and Arlington. Additionally, an Operations Center of Excellence in Nashville will create more than 5,000 new jobs.

Marriott International disclosed that passport numbers and payment card information have been compromised due to a breach of the Starwood guest reservation database. The 6,700-property hotel chain learned during its investigation that there had been unauthorized access to the Starwood network between 2014 and Sept. 10 of this year. Specifically, Marriott said that an unauthorized party had copied and encrypted information and taken steps toward removing it. This might impact as many as 500 million guests who had made a reservation at a Starwood property.

Facebook disclosed that attackers exploited a vulnerability in the social media giant’s code to potentially take over nearly 50 million people’s accounts.

Cisco Systems has pushed through a round of layoffs in its Customer Experience business, saying the changes are part of the networking giant’s continuing transformation into a software- and subscription sales-led organization. The cuts affect between 200 and 300 people in the Customer Experience organization, according to a report in the Register.


> MERGER & ACQUISITION ACTIVITY

SAP Paying $8 Billion for Qualtrics

SAP will acquire Qualtrics International, a developer of experience management or “XM” applications, for $8 billion in cash. Qualtrics’ “customer experience” survey software is used by businesses to track customer and employee experiences and obtain feedback on products and brands. The company has some 9,000 customers, including about 75 percent of the Fortune 100, according to a Seeking Alpha report on the IPO plans prior to news of the SAP acquisition.

Commscope Paying $7.4 Billion for Arris

Network infrastructure provider CommScope confirmed it has inked a deal to buy telecommunications equipment maker Arris in an all-cash transaction for approximately $7.4 billion. Combined, the two companies said the deal will help shape communications networks of the future as it moves into new markets and focuses on network convergence, fiber, 5G, the Internet of Things, and rapidly changing network and technology architectures.

Vista Equity Partners Paying $1.94 Billion for Apptio

Software investment fund Vista Equity Partners — owner of Datto — has agreed to buy Apptio for $1.94 billion. “Since founding, our focus has been on building the next great cloud software platform by dedicating ourselves to helping companies of all sizes and industries manage, plan, and optimize technology investments across their hybrid IT environments,” said Sunny Gupta, co-founder and CEO of Apptio. “As we look to the next chapter of Apptio, we are thrilled to provide immediate liquidity to our shareholders at a significant premium to market prices and we remain deeply committed to our mission, product innovation, geographical expansion, and the work of the TBM Council.”

CVC Paying $1.8 Billion for ConvergeOne Holdings

ConvergeOne Holdings, a global IT and managed services provider that went public less than a year ago, has agreed to be acquired by CVC Fund VII in an all-cash transaction valued at approximately $1.8 billion.

Blackberry paying $1.4 billion for AI Cybersecurity Startup Cylance

Blackberry has agreed to purchase next-generation cybersecurity startup Cylance for $1.4 billion to better predict and prevent known and unknown threats to endpoints.

Thoma Bravo Paying $950 Million for Veracode

Application security testing vendor Veracode will change hands for the third time in 20 months, returning to independent status under the stewardship of Thoma Bravo. Veracode’s SaaS platform is focused on helping security teams and software developers find and fix security-related defects at all points in the software development lifecycle, according to the company. The company serves more than 2,000 customers across a wide range of industries, including nearly a third of the Fortune 100.

LInkedIn Pays $400 Million for Surveying Startup Glint

LinkedIn announced its intent to acquire Glint, an employee surveying startup. While LinkedIn didn’t disclose terms of the deal, CNBC reports that the purchase price was over $400 million, and possibly more than $500 million, citing people familiar with the matter. Glint — which specializes in employee surveys measuring satisfaction with management, compensation, and other internal issues — last raised a $20 million Series D round of funding in November 2017, in a deal said to give the company a valuation of $220 million.

Eaton Buying Ulusoy Elektrik for $300 Million

Power management company Eaton is close to acquiring Turkey-based Ulusoy Elektrik, which provides power equipment for distribution networks and industrial plants. Eaton is looking to purchase Ulusoy Elektrik for around $300 million, according to a report by Reuters citing sources familiar with the deal. If the deal is completed, it will mark Eaton’s first acquisition in years. Eaton declined to comment on the matter. Ulusoy Elektrik did not respond to comment by press time. Ulusoy Elektrik sells switchgear, transformers, remote network monitoring and control systems as well as power management services on a global scale. It has production facilities located in Turkey, Indonesia and Algeria. The company has over 750 employees, including more than 100 engineers, according to the company’s website.

Citrix Paying $200 Million for Sapho

Citrix, looking to help its enterprise customers achieve greater worker productivity, revealed the acquisition of Sapho, a startup with an intelligent portal for engaging employees. Citrix will pay $200 million for the San Bruno, Calif.-based company that leverages artificial intelligence to unbundle monolithic systems into component pieces, streamline internal workflows, and drive smarter decisions.

AGC Networks Pays $16.4 Million for Black Box

Solution provider Black Box has agreed to be sold to a Singapore-based subsidiary of AGC Networks Ltd. for $16.4 million.

VMware buying Heptio

VMware has signed an agreement to acquire Kubernetes startup Heptio, founded by the original creators of Kubernetes, in a move to drive greater Kubernetes adoption in enterprises on-premises and across multi-cloud environments.

Symantec Muying Appthirty and Javelin Networks

Symantec has purchased Appthority and Javelin Networks to strengthen its defense against mobile application attacks and boost its protection around Microsoft Active Directory-based threats.

DXC Buys TESM and BusinessNow

DXC Technology wants to take its ServiceNow business up another two notches. The solution provider announced it has acquired TESM and BusinessNow, two leading ServiceNow partners.

Accenture Buying Kolle Rebbe

Accenture is boosting its presence in Germany with plans to acquire a design agency with a history of working with high-profile clients such as Google and Netflix. Founded in 1994, Kolle Rebbe has carried out some of the most-recognized campaigns in recent years in Germany, such as Google’s “Life is a Search,” Lufthansa’s #sayyestotheworld, Audi’s “Next Level Luxury,” as well as the launch of Netflix programs “Narcos” and “Better Call Saul.”

Conduent Buying Health Solutions Plus

Conduent, which recently completed its divestiture of $1 billion in assets to create a better corporate alignment in what it called its core business, announced its plans to buy a health care software provider. Health Solutions Plus provides payer solutions that offer flexibility and automation to support extended health products like dental, vision and specialty health benefits products. Besides providing end-to-end administration processing — from enrollment to billing to final reporting — the HSP Payer Suite can support multiple lines of business, including commercial, Medicaid, Medi-Cal and Medicare Advantage.

Microsoft Buying AI Startup XOXCO

In its fourth artificial intelligence-related acquisition of the year so far, Microsoft announced it will acquire XOXCO, a company that builds bots and conversational tools. Austin-based XOXCO, founded in 2009, has focused on software design, and then later, bot development beginning in 2013. The company created Howdy, the first bot for collaboration platform Slack that helps schedule meetings, and Botkit, a developer tool for building chat bots, apps, and custom integration which is available today to developers on GitHub, which Microsoft officially acquired in October.

Oracle Buying Talari Networks

Oracle reached a deal to purchase SD-WAN standout Talari Networks, a pure-play vendor in one of the industry’s hottest markets. The acquisition, at an undisclosed price, should enhance Oracle’s cloud networking capabilities at a time when the enterprise software powerhouse is looking to differentiate its Oracle Cloud Infrastructure capabilities. Talari, based in San Jose, Calif., was one of the first companies to offer a technology that allows IT administrators to deploy private networks spanning the Internet through a software layer that abstracts away from underlying hardware.

Microsoft is Buying FSLogix

Microsoft has acquired FSLogix, a developer of application provisioning technology for virtualized workspaces, in a move that’s expected to further extend the virtualization capabilities of the Microsoft 365 system.
The acquisition comes just two months after Microsoft debuted Windows Virtual Desktop, a virtualized Windows and Office service on the Azure cloud platform.

Apple Buys Silk Labs

Apple acquired a developer of artificially intelligent software for connected devices earlier this year, according to a report. The startup, Silk Labs, still maintains its website and there has been no official announcement of the acquisition. The Information reported that Apple has “quietly” acquired the company. Apple did not immediately respond to a request for comment.
Founded in 2015, San Mateo, Calif.-based Silk Labs has focused on developing software for image and audio recognition using deep neural networks, according to the company’s website.

Cisco Buys Ensoft

Cisco Systems is buying Ensoft, a privately held British networking software company. According to its website, Ensoft launched in 1997 and has grown to an annual revenue of 10 million pounds ($12.7 million). Ensoft employs approximately 77 people, according to a Cisco spokeswoman.

Corel Buys Parallels

Corel, developer of a wide range of creativity and productivity software including CorelDRAW and the WordPerfect suite, has acquired cross-platform virtualization software developer Parallels. Bellevue, Wash.-based Parallels is a developer of cross-platform software that virtualizes operating systems to allow them to be run on various platforms. Parallels is a part of the Intel Capital portfolio.

Red Hat Buys Storage Software Startup NooBaa

Open-source software powerhouse Red Hat has acquired storage software startup NooBaa and will fold the company into its existing storage portfolio with an eye toward enhancing its container strategy. IBM earlier this month agreed to acquire Red Hat in a blockbuster $34 billion deal.

Neustar Buys TrustID

Information service provider Neustar has agreed to purchase TrustID to strengthen its authentication and fraud prevention capabilities around outbound calling and clients using digital channels. TrustID was founded in 2007, employs 19 people, and has raised $10.5 million in three rounds of outside funding, according to LinkedIn and CrunchBase. The company most recently hauled in $3.5 million from Rogers Venture Partners in February 2013.

HPE Buying Bluedata

Hewlett Packard Enterprise (HPE) is buying big data specialist, BlueData. Looking to extend its footprint as a supplier of AI and analytics services, HPE will acquire the Santa-Clara-based company known for making virtualization technology for big data and machine learning deployments.