IT Industry News – October 2015

October 2015 brought some big deals, with the biggest seeing Dell offer $26 billion to buy storage company EMC. Interestingly, an EMC subsidiary, VMWare, was also out shopping, picking up a small email startup, Boxer. In another deal involving "big bucks", Western Digital are paying $19 billion for storage competitor Sandisk. IBM were also writing a big cheque, paying $2 billion in a big data/internet of things play for The Weather Network (minus the TV operations), and IBM also picked up a storage company, Cleversafe. Cisco paid $522.5 million for cybersecurity firm Lancope; LogMeIn is paying $110 million for LastPass; Trend Micro is paying $350 million for next generation intrusion prevention systems company HP Tippingpoint; Red Hat picked up deployment task execution and automation company Ansible; Vasco Data Security is paying $85 million for solution provider Silanis; and Apple is buying a speech processing startup, VocalIQ. As industries converge it is interesting to see Securitas pay $350 million for Diebold’s US Electronic Security business.

Other companies in the news include Twitter who announced 336 layoffs; Apple lost a patent fight with the University of Wisconsin to the tune of $234 million (of course they also recorded record profits of more than $5 billion). Google are launching a neat project to bring the internet to 100,000 Indonesian people using balloons (Project Loon).

The US economy continues to impress, adding another 200,000 jobs and having generally positive indicators from surveys and reports. There are signs that the growth is slowing but this is just to be expected. Canada added 12,100 jobs in September but the unemployment rate rose to 7.1%. A new Liberal government was voted in, so we will watch how that works out.

In this Issue:

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


> GENERAL INTEREST

The economy — Canada

Canada added 12,100 jobs in September from August, according to seasonally adjusted numbers from Statistics Canada. On a year-over-year basis, employment was up by 161,200 jobs — an increase of 0.9% — with all of the gains in full-time work. Canada’s unemployment rate edged up to 7.1% from 7.0% in August.

The Canadian staffing index showed improvement in September compared to August, but a trend of moderate year-over-year declines continued. September’s reading was 107, up from August’s level of 102, but down from the September 2014 reading of 114. Throughout 2015 there has been a trend of moderate year-over-year declines in the index.

The economy — US

The Conference Board’s US leading economic index edged down in September but still suggests moderate growth will continue. The index fell 0.2% in September to a reading of 123.3 (2010 = 100), following no change in August and July. The US economy is on track for moderate growth of about 2.5% in the coming quarters, despite the mixed global economic landscape.

The outlook among American workers as measured by Randstad’s US employee confidence index was little changed in the third quarter and remains exceptionally high. The index edged down slightly to a reading of 61.8 in the third quarter from 61.9 in the second quarter, remaining near record highs throughout 2015.

CEO confidence declined in the third quarter after improving in the first half of the year. The Conference Board’s and PwC Network’s measure of CEO confidence fell to a level of 48 in the third quarter from 58 in the second quarter. A reading of more than 50 reflects more positive than negative responses. CEOs’ assessment of current economic conditions was considerably less positive than in the second quarter.

The number of IT jobs in the US rose 0.3% in September from August, according to the TechServe Alliance. This compares to a 0.1% increase in total nonfarm jobs in the US. Year-over-year, IT jobs rose by 4.1% since September 2014, adding 195,000 workers for a total of almost 5.0 million jobs.

The TechServe Alliance said that engineering jobs edged up only slightly into positive territory, up 0.02% in September from the previous month and 0.7% year-over-year, adding 18,500 engineering workers since September 2014 for a total of more than 2.5 million US engineering jobs.

Economic activity in the US nonmanufacturing sector increased in September but at a slower pace than August. The Institute for Supply Management’s nonmanufacturing composite index fell to a reading of 56.9 from August’s reading of 59.0. A reading above 50 indicates expansion in the sector. The employment portion of the index rose to a reading of 58.3 in September from August’s reading of 56.0.

The Conference Board’s US employment trends index edged up in September to a reading of 128.76 from August’s downwardly revised reading of 128.66. The September reading is up 4.6% from the same month a year ago. The employment trends index does not suggest a negative shock will impact the labor market any time soon. The US Department of Labor on Friday reported the US added 142,000 jobs in September.

The Institute for Supply Management’s purchasing managers index for US manufacturing decelerated to a reading of 50.2 in September, down from August’s reading of 51.1. The reading indicates some continued expansion, but at a slower pace. Readings above 50 indicate growth. The employment portion of the index also fell to a reading of 50.5 in September from 51.2 in August, reflecting growing employment levels from August but at a slower rate.

Confidence in the US labor market climbed among HR professionals this year, according to the Jobs Outlook Survey released by the Society for Human Resource Management. More than two-thirds of HR professionals surveyed, 69%, had some level of confidence in the US job market for the second half of 2015 and expected job growth, representing the highest level of optimism among HR professionals since the survey launched in January 2009.

US private sector employment rose by 200,000 jobs in September from August, according to the ADP national employment report produced by ADP. September’s jobs gain is an increase from August’s 186,000 additions — a slight downward revision from a previously reported increase of 190,000 jobs — and 169,000 additions in July.

Optimism among small business owners slipped this month, according to the SurePayroll Small Business Scorecard survey for October, with 70% saying they are optimistic about the small business economy, down from 76% in September’s survey. The report also surveyed the small business owners about their biggest fears. The top three were (1) An increase in taxes on their earnings: (2) Government regulations: and (3) Recession

US real GDP rose in the third quarter at an annual rate of 1.5%, according to an "advance" estimate issued by the US Bureau of Economic Analysis. It’s below the consensus forecast for 1.7%, and follows an increase of 3.9% in the second quarter. "The economy is in better shape than captured in the growth of real GDP," according to a report by James Marple, senior economist at TD Economics. "The headline masks solid strength in domestic demand that has historically been the best predictor of future GDP growth."

The American Staffing Association’s index measuring employment in the US staffing industry edged down 0.04% compared to the previous week. The index value fell to 100.54. The index was down 4.02% from the same week last year. However, staffing employment rose 0.63% over the past 30 days.


> COMPANY NEWS

Twitter will lay off 336 employees, or about 8% of its workforce. Twitter noted in a securities filing disclosing the layoffs that the restructuring is part of an overall plan to focus on the company’s top products and to drive overall efficiencies. The job cuts follow earlier reports that Jack Dorsey, who was brought in as the company’s chief executive for a second time earlier this month, was planning layoffs across all of the company’s departments.

The Wisconsin Alumni Research Foundation (WARF) won a verdict against Apple after a jury trial in federal court. In the first phase of the two-phase trial, the federal jury found that Apple was guilty of infringing on the asserted claims and determined the patent claims to be valid. The issues of infringement and validity took the jury six hours to deliberate in WARF’s favor. The second phase of the trial determined Apple owed WARF $234 million in damages.

Free website hosting service 000webhost has suffered a data breach which has placed the service’s security practices under scrutiny and potentially exposed millions of users to risk. 000webhost is a free web hosting service which supports both PHP and MySQL. A hacker used an exploit in an old, unpatched version of PHP to upload malicious files and gain access to the service’s systems. Not only was the full database containing the usernames, passwords and email addresses compromised, but this information has been dumped online.

Google will launch hundreds of Project Loon balloons to make fast internet access available across Indonesia, which remains one of the least connected nations in Southeast Asia. This will bring high speed internet to more than 100 million people who currently lack network access.


> MERGER & ACQUISITION ACTIVITY

Dell is buying EMC for about $67 billion in cash and stock in what equates to a bet that bigger is better in enterprise technology and hybrid data centers. The combination of Dell and EMC will create the largest "privately-controlled, integrated technology company." EMC and Dell are creating a mega-vendor just as other technology players such as Hewlett-Packard and eBay are splitting up to compete with nimbler rivals. The deal, which is expected to close in mid-2016, is financed via equity from Michael Dell, MSD Partners, Silver Lake, and Temasek, debt financing, cash and the issuing of the tracking stock. Dell and his partners will own 70% of the combined company. Dell will remain CEO and chairman. EMC’s CEO Joe Tucci will stick around until the deal closes. A Dell letter to customers suggests that the expected revenue synergies of the combined entity are three times the cost synergies.

VMware has acquired the small Austin-based email startup Boxer. VMware said it plans to merge Boxer with AirWatch to bolster its suite of enterprise mobility management services revolving around secure access to email, content and apps. Boxer offers both a consumer and business version of its mobility management platform, but VMware was drawn to Boxer by its enterprise-grade personal information management (PIM) product for iOS and Android devices, which uses a container approach to app management and security.

Western Digital is to buy fellow storage supplier SanDisk for around $19bn. The deal marks the largest consolidation in the storage market to date. Western Digital said the deal will double its addressable market and expand its position in higher-growth segments, in particular non-volatile memory where SanDisk has a 27-year history. SanDisk is the third largest flash memory manufacturer after Samsung and Toshiba. While SanDisk is strong in the memory chip market, Western Digital is one of the largest makers of computer hard disk drives.

Security software company Trend Micro International is buying HP TippingPoint, a provider of next-generation intrusion prevention systems (NGIPS) and related network security solutions. The approximately $300 million agreement encompasses security technology, intellectual property, industry expertise, as well as a large, loyal enterprise customer base. This acquisition positions Trend Micro increases capability as an enterprise security provider of dynamic threat defense solutions spanning endpoints, network, data center and the cloud.

Apple has reportedly bought UK startup VocalIQ. VocalIQ builds speech-processing technology. Its software is designed to facilitate more natural communication between humans and computers, as explained by sources close to the deal. In a blog post from the company, VocalIQ explains how the challenge of the Internet of Things is in combining human and artificial intelligence to create a continuous stream of new knowledge. It believes we need more than automated speech recognition (ASR) to improve the conversation between people and machines. With the power of machine learning, VocalIQ is attempting to create the type of virtual assistant we have only seen in movies like "Her". Such a tool could enhance Apple’s Siri or become part of Apple’s automobile project.

IBM has agreed to acquire Cleversafe, a supplier of object-storage software and object-storage appliances, for an undisclosed amount. Storage is a frequent access ramp for an enterprise to start using cloud services, and Cleversafe will give IBM an additional route to attract such storage users. Object storage is of particular interest for those collecting masses of customer data from websites or e-commerce systems or through their use of NoSQL systems, such as Cassandra and MongoDB. Founded in 2004, Cleversafe is a privately held Chicago company with 350 patents in object-based storage. Its software is designed primarily for on-premises storage systems, with a potential capacity of up to "billions of gigabytes".

Remote access software and service provider LogMeIn will acquire LastPass, the popular single-sign-on password management service, which offers free, pro, and enterprise packages. LogMeIn will pay $110 million cash for the company, incorporated as Marvasol, plus another $15 million in retention bonuses and other incentives. LogMeIn offers a suite of familiar tools for IT departments, including remote control software that lets technicians access the client computers of remote users. It also offers the Web-conferencing and screen-sharing service join.me and the file-sharing service, Cubby.

Docker, the container engine and tooling company, is acquiring Tutum, a startup whose online service provides a workflow for moving containerized applications from development into production. Tutum has developed a workflow backed by an integrated set of tooling for moving containers into operations. It can take an application coming out of the build process, where different segments of code are reassembled in the right order, and move it as a containerized application into a production deployment in a few minutes. Tutum has 24,000 developers using its Tutum container platform, said Borja Burgos-Galindo, cofounder and CEO of Tutum, in an interview. Usage is free because Tutum’s service, started in 2013, is still in its pilot stage.

Red Hat has acquired Ansible Inc., a software vendor specializing in deployment, task execution and automation. "Ansible’s automation capabilities, together with Red Hat’s existing management portfolio, will help users drive down the cost and complexity of deploying and managing both cloud-native and traditional applications across hybrid cloud environments," Red Hat said in a statement. The deal, expected to close this month, would bring the Ansible and Ansible Tower automation and DevOps platforms to Red Hat’s existing hybrid cloud and IT management solutions including CloudForms and Satellite. The new additions are designed to be agentless, requiring little coding skills, and capable of managing applications across private and public clouds, and streamline OpenStack installations and container adoption.

Securitas has agreed to purchase Diebold’s US-based Electronic Security business, leading to the formation of the new Securitas Electronic Security group. The deal, agreed for $350 million with a 10% caveat depending on the transfer of client contracts to Securitas, gives Securitas a stronger backbone when it comes to technology. Securitas provides manned security services ranging from bodyguards to dogs and consulting for small, local establishments to global organizations. However, beyond surveillance cameras, the company has little to offer in the terms of modern, tech-based security solutions. According to Diebold, the portfolio generated sales worth approximately $330 million from June 2014 to June 2015. By acquiring Diebold’s unit, Securitas will gain a portfolio of intrusion, fire, video, access control, monitoring and maintenance technology for both the commercial and financial markets.

Solution provider Silanis is to be acquired by e-signature and authentication firm Vasco Data Security. The deal, worth US$85 million ($110 million in Canadian dollars), will enable Silanis to expand its international footprint, the company said. Silanis’ flagship solution is the e-SignLive, a SaaS-based electronic document signing service that has to date largely targeted U.S. and Canadian customers. The company focuses on regulated market segments and has recently started offering regional data storage to help customers remain compliant. Last November, it signed a deal to host customer data with IBM Canada. IBM Canada is a separate subsidiary of IBM and it stores data on Canadian soil, meaning that its data cannot be commandeered under the Patriot Act, Petrogiannis said. Silanis is also rolling out local storage capabilities in other regions. Silanis, which encrypts everything both in transit and at rest, is SOC2-certified, and audited every six months by KPMG. It offers companies the option to manage their own encryption keys within its Hardware Storage Modules (HSMs), and also lets them deploy its code base behind their own firewall, if regulations prevent them from putting the documents in the cloud. This is the case with NASA’s Jet Propulsion Laboratory, which is a Silanis client.

IBM is reputedly paying $2 billion for The Weather Company’s B2B data business and associated properties. When IBM created an Internet of things unit in March it also forged a pact with The Weather Company. The general theme was to use The Weather Company’s data and sensors and combine it with IBM’s analytics and Watson platform. The Weather Company’s TV operations were not sold in this deal and The Weather Channel will license data from IBM under a long-term contract. For IBM, weather data is seen as a key cog in the enterprise Internet of things. IBM will acquire The Weather Company’s data experts, forecasting tools and cloud platform. The Weather Company will also give IBM more touch points via apps, flight data and information products.

Cisco is paying $422.5 million for cybersecurity firm Lancope. Based in Alpharetta, Georgia, privately held Lancope specializes in network behavior analytics, threat visibility and security intelligence — features Cisco said it plans to use to bolster its Security Business Group as well as the company’s "security everywhere" strategy. Cisco and Lancope have been commercial partners for some time, with Lancope’s threat visibility technology being used to turn a Cisco-run network into a security sensor. But coming together under one organization will allow the companies to integrate services more organically and detect network threats more rapidly.