IT Industry News – October 2016

A Little History of previous years’ Octobers

Five years ago, in October 2011, an industry icon, Steve Jobs passed away and IBM announced Virginia Rometty as their first female CEO. On the M&A front, Oracle made a couple of buys, including RightNow Technologies ($1.5 billion) and Endeca Technologies; Sony bought Ericsson out of their Sony Ericsson joint venture ($1.5 billion); Red Hat bought storage company Gluster ($136 million); and Cisco bought BNI Video ($99 million). The October 2012 news was dominated by Hurricane Sandy and the US presidential election.  The big deal of the month was a $1.5 billion merger of two US cell carriers, T-Mobile and MetroPCS. There were also a number of smaller deals, with EMC beefing up in the security area (Silver Tail), Telus expanding its medical solutions portfolio (Kinlogix Medical) and Avnet improving its IBM capabilities (BrightStar and BSP). In the social networking world, Yelp bought its European competitor Qype in a $50 million deal. Three years ago, October 2013 was not a dynamic M&A month, although there was certainly some activity. Oracle announced two acquisitions, both cloud-based companies: Big Machines provides pricing and quote date for sales and orders; and Compendium is a content marketing company. Other “names” out shopping included Avaya buying the software division of ITNavigator for its call centre and social media monitoring software; Rackspace bought ZeroVM, a tech company with a software solution for the cloud; Intuit bought consulting company Level Up Analytics, primarily to acquire its talent; VMWare bought desktop-as-aservice company Desktone; Netsuite bought human capital software company TribeHR; and Telus enhanced its mobile offering with the purchase of Public Mobile. In October 2014, we saw a new trend, with two public companies both choosing to split into smaller entities. HP announced it was creating a business service focused Hewlett-Packard Enterprise and personal computing & printer company HP Inc. Symantec also chose to split into two independent public companies, one focused on business and consumer security products, the other on its information management portfolio. Other interesting news saw IBM pay $1.5 billion to GlobalFoundries so it would take away its money losing semiconductor manufacturing business. NEST bought out competitor Revolv; EMC bought three cloud companies: The Cloudscaling Group, Maginatics and Spanning Cloud Apps; and in Korea, Kakao and Daum merged to form a $2.9 billion internet entity. Last year, 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 paid $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 paid $110 million for LastPass; Trend Micro paid $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 paid $85 million for solution provider Silanis; and Apple bought a speech processing startup, VocalIQ. As industries converged it was interesting to see Securitas pay $350 million for Diebold’s US Electronic Security business.

Which brings us back to the present

Just like four years ago, October 2016 news has been dominated by the US Presidential election and of course the upset happened! Maybe the election is why the M&A market was slow this month? Not much in the way of deals, with one BIG deal seeing Qualcomm pay $47 billion for NXP Semiconductor. The only other sizable deal saw Wipro pay $500 million for IT cloud consulting company Appirio. Google picked up Toronto-based video marketing startup FameBit and Pivot Technology Solutions picked up Ottawa-based Teramach and that was about it for October.

Other news saw Google step into the smartphone world with the release of Pixel, at a time when wireless use in Canada is more than 50% of telecom revenues; however that is a crowded and hyper-competitive space so it will be interesting to watch. Twitter announced layoffs plus the fact it will be shutting down the video service Vine. Lastly, HP Inc. also announced layoffs in its plans.

Despite all of the hype and vitriol of the presidential campaign, most indicators that were based on numbers were reasonably positive. A couple of subjective indices (measuring confidence) were down, but nothing crazy. There were also numerous reports from IDC and Gartner this month with predictions of growth in many tech sectors including total IT spend, cloud spending, security spending etc. About the only areas that are trending down are PC sales which is no surprise and smartwatches, which is a surprise.

Here at Eagle, we’re very proud of our CEO, Janis Grantham’s inclusion in the 2016 Global Power 100 — Women in Staffing list.

In this Issue:

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


> GENERAL INTEREST

General

If you own a Samsung Galaxy Note7 – even a new replacement model issued after the first recall – you should turn off your device and never use it again, according to Samsung Electronics Canada. Samsung says it’s working with regulatory bodies around the world to investigate new reports of its Galaxy Note7 replacement devices catching fire or smoking. The replacements were sent, free of charge, to consumers that first bought the device in its early days of launching to the market. Despite saying it had replaced a defective battery that was blamed for the explosions, Samsung now says its new devices shouldn’t be trusted.

Staffing Industry Analysts released the 2016 Global Power 100 — Women in Staffing list. This is a list of the 100 most influential women in the North American and European staffing industries. Eagle’s CEO Janis Grantham is on this list!

Global information technology spending is expected to hit $3.5 trillion in 2017, up 2.9% from 2016, according to Gartner. The rebound from the 0.3% decline in IT spending in 2016 is driven by software and services. Software spending will be up 6% in 2016 and accelerate to growth of 7.2% in 2017. Data center systems will be up 1.3% in 2016. IT services will post growth of 3.9% in 2016 and 4.8% in 2017. Devices spending decreased 7.5% in 2016, but will recover to flat growth in 2017.

IDC is forecasting that global revenue for security technologies will grow from $73.7 billion in 2016 to $101.6 billion in 2020, or at a compound annual growth rate of 8.3%. That growth rate is more than twice the forecasted IT spending over the next five years.

PC shipments are in decline worldwide according to Gartner. Shipments totaled 68.9 million units in the third quarter of 2016, a 5.7% decline from the third quarter of 2015. This marks the eighth consecutive quarter of PC shipment decline, the longest declining period in the history of the PC industry.

Despite the launch of a new Apple Watch line, smartwatch shipments plunged more than 50% between the third quarter of 2015 and the third quarter of this year according to numbers from IDC.

IDC’s Worldwide Quarterly Cloud IT Infrastructure Forecast nudges total IT budget spent on cloud to 36.9% in 2016. Total spending on computing products for deployment in both private cloud and public cloud will amount to $37.4 billion this year, according to IDC. That’s a further increase of .7% in growth from its 15.5% estimate at the end of the second quarter. The spending will reach a high of 16.2% for the year.

IDC reports that the big data and business analytics market will grow to $203 billion over the next few years — a double-digit increase from this year. The banking industry is expected to be a big driver of this increase in spending, while IT and businesses services will lead most of the tech investing.

The economy – Canada

According to the CRTC’s 2016 Communications Monitoring Report, the wireless market now represents 51% of all retail telecommunications services revenue, which reached a record $65.7 billion last year. Moreover, the number of subscribers to wireless services continues to grow, increasing by 3.4% last year to nearly 30 million.

Toronto-founded and New York City-based mass media and information firm Thomson Reuters Corp. is building a new technology centre in downtown Toronto, and relocating its headquarters there as well. The centre is expected to create 400 Canadian technology jobs over the next two years, growing to approximately 1500 jobs over time.

Employment in Canada rose by 67,200 jobs in September from August, a 0.4% increase on a seasonally adjusted basis according to Statistics Canada. Canada added 44,100 part-time jobs and 23,000 full-time jobs. The unemployment rate was unchanged at 7.0%.

The economy – US

Despite the rattling effect of recent layoffs at a few tech firms in Silicon Valley, employers in California’s Silicon Valley have optimistic hiring plans for the fourth quarter, according to West Valley Staffing Group’s latest Silicon Valley economic forecast survey. The quarterly survey found 49.0% of hiring managers predict their hiring needs to increase in the fourth quarter and 40.0% believe their hiring trends will remain steady. Only 11.0% of hiring managers expect their needs to decrease in the fourth quarter.

US real GDP grew at an annual rate of 2.9% in the third quarter, according to the “advance” estimate of GDP growth from the US Commerce Department. In the second quarter, real GDP advanced 1.4% and the economy grew in the third quarter at the fastest pace in two years

The US Conference Board’s consumer confidence index fell in October to a reading of 98.6 (1985=100), down from 103.5 in September, which marked its highest level since the end of the recession.

The US Conference Board’s Leading Economic index edged up in September, suggesting the economy will continue expanding at a moderate pace through the start of the next year. The index rose 0.2% in September to a reading of 124.4 following a 0.2% decline in August and a 0.5% increase in July.

The Conference Board’s US Employment Trends Index rose in September to a reading of 128.51 from August’s downwardly revised reading of 127.96. The September reading, which followed a decrease in August, is up 1.1% from the same month a year ago. The US Department of Labor reported the US added 156,000 jobs in September and gained 23,200 temp jobs.

The number of US freelancers has risen by 2 million since 2014 to a total of 55 million people this year, according to the third annual “Freelancing in America” report commissioned by online staffing firm Upwork and the Freelancers Union. Presently, 35% of the US workforce is freelancing compared to 34% in the previous two years. Upwork’s new report also found that 63% began freelancing by choice rather than necessity, up from 53% in 2014.

Economic activity in the US nonmanufacturing sector increased in September at a faster pace than August. The Institute for Supply Management’s nonmanufacturing composite index rose to a reading of 57.1 from August’s reading of 51.4. Readings above 50 indicate expansion in the sector.

The battle for talent is heating up at banks, according to several findings from the Crowe Horwath LLP 2016 Financial Institutions Compensation Survey. Turnover is up, staffing levels are increasing and plans to pay employees at an above-market rate also increased. During and after the recession, many more banks reduced or held back on staffing increases. However, the survey found that banks returned to pre-recession levels with only 3.6% planning to reduce staffing and 34.1% planning to maintain staffing levels; 36% are planning for normal growth and 13.8% aim to expand. The survey also found bank employees are changing jobs at the fastest pace in 10 years, with nonofficer turnover at 18.7% and officer turnover at nearly 7%.

CEO confidence retreated slightly in the third quarter after increasing in the prior quarter, according to The US Conference Board. In the third quarter, the measure fell to a level of 50, down from 52 in the second quarter of 2016. A reading of more than 50 reflects more positive than negative responses.

The economy – Outside North America

The overall unemployment rate in Singapore for the third quarter ending September 2016 was unchanged at 2.1% from June 2016, and held steady among residents and citizens, according to the latest Labour Market Advance Release Third Quarter 2016 report released by the Ministry of Manpower.

The unemployment rate in Australia fell to 5.6% in September compared to the previous month, according to data from the Australia Bureau of Statistics. The figures also showed an uptick in part-time employment growth, with an increase of 11,800 persons, while full-time employment decreased by 7,900 persons. Meanwhile, the seasonally adjusted number of persons employed decreased by 9,800 in September 2016.

The latest labour market figures published by the Office for National Statistics (ONS) show that the employment rate in the UK (the proportion of people aged from 16 to 64 who were in work) for the period from January to March 2016 was 74.5%, the joint highest since comparable records began in 1971. The figures showed that there were 1.66 million unemployed people (people not in work but seeking and available to work), 10,000 more than for March to May 2016 but 118,000 fewer than for a year earlier.

According to the latest Morgan McKinley London (UK) Employment Monitor, September saw a 5% year-on-year decrease in the number of jobs available. The report also showed a decrease in the number of professionals seeking jobs compared to the same period last year. However, on a month-to-month basis, there was 1% increase in jobs available and a 9% increase in professionals seeking jobs with 8,400 new jobs available compared to last month.

The unemployment rate in Hong Kong remained steady in September at a seasonally adjusted 3.4% for the period ending in September, the same rate as the previous period (June-August) according to figures from the Census and Statistics Department.

The OECD (Organisation for Economic Co-operation) unemployment rate was stable at 6.3% in August 2016, the same as the previous month. Across the OECD area, which includes its 35 member countries, 39.4 million people were unemployed, 9.5 million less than in January 2013 peak, but still 6.8 million more than in April 2008, before the economic crisis started affecting the labour market.
In the euro area, the unemployment rate in August was 10.1%, unchanged since April 2016. Within the euro area, the unemployment rate changed the most in Latvia and the Netherlands (where it fell by 0.2%, to 9.3% and 5.8%, respectively) and France (where it increased by 0.2%, to 10.5%).
The unemployment rate was also stable in the United States (at 4.9% for the third consecutive month) and Mexico (at 3.8%), while it increased by 0.1% in Japan (to 3.1%) and Canada (to 7.0%). More recent data show that, in September, the unemployment rate increased by 0.1% in the United States (to 5.0%), while it was stable in Canada.

The unemployment rate in Latvia fell to 7.9% in September from 8.1% in August according to the State Employment Agency. The last time the jobless rate in Latvia fell below 8% was in December 2008.

The registered unemployment rate in Switzerland for September was at a seasonally adjusted 3.3% in September, up from 3.2% the previous year and unchanged from the previous month, according to data from the State Secretariat for Economic Affairs (SECO).

The number of job vacancies in Ireland grew by 8% during the third quarter compared to the previous year, reports the Irish Independent with research from IrishJobs. Most of the reported job vacancies are in the hotel and catering sector, followed by sales. Meanwhile, roles in the banking, financial services and insurance (BFSI) industries now account for 10% of all advertised jobs as businesses prepare for Brexit. The data shows that available roles in the manufacturing sector have soared by 31% over the last year alone. Meanwhile, the tech industry has seen available jobs decline by 14% when compared with the same period last year.

The IT industry in India is set to cut down the intake of freshers by nearly 20% this year, reports Hans India. The decrease in hiring for the career field is mainly due to the US election and the impact of Brexit. Many IT companies have already notified colleges that they will cut down on hiring and recruiting fresh graduates. Furthermore, recruitment is restricted to a few top colleges now whereas before, companies would visit many different colleges and recruit many students.


> COMPANY NEWS

Twitter announced it will be laying off about 9% of its workforce, and that Vine its short looping video sharing site will be phasing out of service. While no firm date was set for killing the service, Vine said the mobile app will be discontinued in the coming months.

Google announced it will make its own smartphones, to be called Pixel. Although several handset makers have been partnered with Google to create Nexus phones, Google will provide their own take on the best Google experience, by bringing hardware and software design together under one roof. The first two phones, Pixel phones, with 5-in. or the Pixel XL with 5.5-in screens, are available now for pre-order in Canada, the U.S., Britain, Germany and Australia, starting at US$649. They’ll run the Android 7.1 operating system, and, like Nexus phones, updates will be delivered directly from Google and not rely on clearance from carriers.

HP Inc., the PC and printing company that resulted from the split of Hewlett-Packard last year, plans to cut between 3,000 to 4,000 jobs in the next three years. The layoffs will come in fiscal 2019 and are expected to generate a gross annual run rate savings of $200 million to $300 million beginning in fiscal 2020, according to the filing. HP said that the cuts will vary by country, based on local legal requirements and consultations with employee works councils and other employee representatives.
HP said that restructuring charges associated with the job cuts will total $350 million to $500 million.


> MERGER & ACQUISITION ACTIVITY

A Toronto startup that connects companies with influential online video creators has been purchased by YouTube owner Google. FameBit, which since its founding three years ago has seen brands and YouTube content creators use its agency-free platform to collaborate on more than 25,000 videos, will now be added to Google’s arsenal of marketing services.

IT services and outsourcing provider Wipro Limited announced it will acquire Indianapolis-based IT cloud consulting firm Appirio for $500 million. Appirio also owns Topcoder, a crowdsourcing marketplace with more than one million IT professionals, from coders to data scientists, on its platform. Appirio bought Topcoder in September 2014. Wipro will consolidate its existing cloud applications practices of Salesforce and Workday under the Appirio brand and structure. Appirio CEO Chris Barbin will lead the expanded business. Established in 2006, Appirio is headquartered in Indianapolis with offices in San Francisco, Dublin, London, Jaipur, and Tokyo and has 1,250 employees worldwide. Appirio’s clients have included Stryker, Robert Half, Johnson Controls, Cardinal Health, Coca-Cola, eBay, Facebook, Home Depot, and Sony PlayStation.

Qualcomm will buy NXP Semiconductor for $47 billion in a move that sets the mobile chip giant up for the broader Internet of things and automotive market. By combining NXP, which makes mixed-signal chips and has a broad footprint in microcontrollers, automotive, networking and security, with Qualcomm’s mobile presence the combined company is well equipped to go after Internet of things markets, smart cities and a similar areas. The combined company will have annual sales of about $35 billion.

TeraMach Technologies Inc. of Ottawa has been acquired by global IT services provider Pivot Technology Solutions. TeraMach, who is celebrating 20 years in business this year, will continue to be a separate company and both TeraMach offices (Ottawa and Markham, Ont.) will remain open. Based in Toronto, Pivot considers itself a Canadian company; however, the organization deals predominately in the U.S. With TeraMach, Pivot intends to position the solution provider as its Canadian arm.


> 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/