Archive for September, 2009

Here is an interesting article from Greentech Media.

“A few months ago, we wrote a list of the ten most likely companies to be bought in the near future with a list of five that would never get bought. (Greenfuel Technologies, one of the top candidates for not being sold, ceased operations the next day. Greenbox, bought by Silver Spring Networks last week, was listed as a possible impulse buy in smart grid.)

But who is going to buy? Here are the main ones. The list is based on stated strategies, company histories, current market circumstances and gut feelings. In other words, pure science.

1. General Electric: GE likes to shop. It got into wind by buying Enron’s wind division in 2002 and since then has invested in, or bought, companies like Southwest WindPower and ScanWind. GE now battles Vestas for the top spot in wind.

A similar trajectory occurred in water. It entered the water industry by purchasing Glegg in 1999 and then followed up with BetzDearborn and Osmonics. GE’s water group is now a $2.5 billion plus operation with long-term goals to hit $10 billion.

GE’s latest obsessions are smart grid, energy storage, and components and software for energy efficient buildings. In all, GE has bought 717 companies and invested in 236, according to this site. With energy as the company’s future, the wallet will be open.

2. Siemens: The German GE. Expect to see a lot of emphasis on energy services, water, smart grid, energy efficient components, wind and equipment for building biofuel refineries.  In August, it purchased majority shares in two Chinese circuit breaker makers.

3. Applied Materials: Applied is the world’s largest manufacturer of semiconductor manufacturing equipment and acquisitions are simply a way of life. Startups simply can’t achieve the scale they need to become commercial and the established companies don’t have the R&D to spread around to try out every single idea. In a sense, the equipment business is really America’s Got Talent for the vapor deposition crowd.

Applied entered the solar market with its purchase of Germany’s Applied Films for $464 million in 2006. It hasn’t been dreamy: many analysts believe amorphous silicon, the kind Applied’s equipment is geared toward, will become marginalized. But it probably won’t close the wallet. Last year, Applied started to quietly lay plans to get into the market for manufacturing equipment for batteries and energy efficient lights. Applied’s VC arm has also invested in a wide variety of companies. Some companies that may go into its maw: Solaicx (ingots – it already invested in Solaicx), Plextronics (printable circuits) Kateeva (novel OLED tools) and something in CIGS.

4. Taiwan Semiconductor Manufacturing Co.: Back in the mid-1980s, investors told Morris Chang that his idea of building a chip factory for hire was nuts. Since then, TSMC has become the world’s largest foundry, pulling in billions a year. In August, Chang came back as CEO, announced that TSMC wants to get into LED lights and solar panels, and would likely buy companies. Asian conglomerates, in fact, will be some of the biggest buyers in the coming years. The company is known for relentless manufacturing expertise and a highly competitive culture, like First Solar and Intel. VCs have told us that TSMC’s VC unit is already in the Valley armed with a spread sheet detailing markets it would like to participate in. UMC, the little brother rival of TSMC, has launched similar plans. TSMC and UMC could also become factories-for-hire in solar.

5. Valero: Take a look at this chart. Valero doesn’t go for those mega-mergers, like Chevron and Texaco. Instead, it buys lots of small items. And it’s aggressive. Think of it. Seven years ago, you never saw a Valero station. Now they are a common site. This year it bought seven ethanol plants from VeraSun for nearly $500 million and several other ethanol producers want to offload facilities. If some companies can start to show cellulosic ethanol or algae fuel can scale, there is a good chance Valero will show up with a checkbook first. Chevron, BP and ExxonMobil by contrast seem more intent on forming research alliances with biofuel startups.

6. Toshiba: Batteries, flash memory, computer components, advanced materials, televisions: these are some of the green markets the 150-year old company is in. Toshiba officials said recently that it may need to start buying companies in LEDs to increase its market share. Whether by Toshiba or not, LED startups will likely begin to get snapped up in any event: it’s a growing market with high capital costs. Some would-be purchases: Luminus Devices, Bridgelux and Renaissance Lighting).

7. Philips: The same arguments that apply on Toshiba largely apply here, but in LEDs it will likely focus more on lighting fixtures than the light sources, which are semiconductors. It has already bought two companies this year-Teletrol (light fixtures) and Dynalight (controls). Between 2005 and 2007 it bought $5.4 billion worth of lighting companies.

8. Cisco Systems: Not a lot of explanation needed. Cisco wants to deploy its routers and software to control the power consumed by phones, PCs and servers and later the grid, homes and commercial buildings. Just as important, the company has a history of buying lots of companies and actually making the acquisitions work. Possible Cisco buys: Verdiem, Hara, EPS (energy optimization for dairies-very interesting) Optimum Energy, Other buyers in this market: Oracle and SAP. Another plus: Cisco tends to pay higher prices than conglomerates like Siemens, according to Dave Dreesen of Battery Ventures.

9. IBM and Intel: Smart grid and energy efficient computing. Intel periodically goes through acquisition binges. Between 1999 and 2003, Intel bought 37 companies for $11 billion, most of them in communications. Later, most of them were sold off. Did that cure Intel of buying? No way, it got into consumer electronics a few years later. It has begun to plant its processors into wind turbines and smart grid equipment. Intel lately has discussed how digital technology could revolutionize building management and smart grid. History makes me think that someone like Tendril or Lumenergi could be an Intel company.

IBM gobbles up companies too. Side note: IBM has nearly 398,455 employees and $106 billion in revenue. There are probably start-ups that IBM has bought and forgot they owned.

10. SunPower: Also a top ten acquisition target. SunPower faces pressure from both directions: China’s Suntech Power Holdings is moving up into the high efficiency panel market SunPower created and while First Solar is setting a low, attractive price for solar nearly everywhere. Thus, like nearly every other solar maker, SunPower will need to diversify. It has been advertising like crazy to make itself a consumer brand so perhaps it will buy an installer, someone doing a solar appliance (thermal, light and PV all in one) or one of the companies doing software for remote solar estimates like Sungevity or Global Solar Center. A BIPV company is another possibility. It has a history in acquisitions with the purchases of PowerLight and Solar Solutions.”

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I think that we last week saw a start of a new boom, A123 soured on the IPO, and many candidates are waiting in line. Here is piece on the issue from Reuters.

“SAN FRANCISCO, Sept 24 (Reuters) – A 50 percent leap in the shares of lithium-ion battery maker A123 Systems Inc (AONE.O) on their first day of trading looks likely to jumpstart the market for clean-tech share offerings.

The Watertown, Mass.-based A123 Systems is now worth over $1.9 billion, a striking valuation for a company that has yet to make a profit and still needs large-scale commercialization.

Industry executives and experts said A123’s success shows investors have an appetite for green technology companies that lose money, but have tremendous potential.

So the stock’s first day jump, which is the second-best performance for a debut stock in 2009, should encourage more venture capital-backed clean technology companies to go public, they added.

“This is an interesting time for the market because there are several (clean-tech) companies that have been growing very nicely,” said Faysal Sohail, managing director of venture fund CMEA Capital, which is an investor in A123.

Sohail declined to comment specifically on A123, but said the whole environment is creating opportunities for clean-tech companies and expects 2010 to be a busy year for green IPOs.

“They are real companies with substantial revenue and growing at a very fast clip,” he said.

CMEA Capital also backs companies such as Silicon Valley solar manufacturer Solyndra and biofuel company Codexis, which many see as likely candidates for the IPO market.

Other green companies deemed ripe for an IPO include smart grid network company Silver Spring Networks, electric carmaker Tesla Motors and solar thermal company BrightSource Energy.”

Read the full article here.

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As the economic slump is fading off, tech titans have amassed cash for possible takeovers. Here is an opionion further explaining this from 24/7 Wall Street Blog.

“The economy is obviously getting better, so long as you are not one of the unemployed or about to lose your job.  Now with more than a 50% rally from the March lows and a Dow Jones Industrial Average challenging the 10,000 level, suddenly everyone wants to put on their investment banker hats again and look for buyers and buyout candidates after deals are announced.  This week’s Dell Inc. (NASDAQ: DELL) deal for Perot Systems Corp. (NASDAQ: PER) was a $3.9 billion acquisition versus $12.7 billion in cash and equivalents held at the end of the quarter.  The Oracle Corp. (NASDAQ: ORCL) deal for Sun Microsystems Inc. (NASDAQ: JAVA) is valued at $7.4 billion, or $5.6 billion net of Sun’s cash and debt.  We went back through our list from September 2, 2009 where we noted that outside of the financials  in the 20 largest US companies had a cash hoard of $335 billion that could be used for mergers and acquisitions, and that is not accounting for lines of credit, stock or debt that could be sold, and other means of financing a deal.  While nowhere near all of the cash will ever be used, many companies could pay big dividends before any tax changes.

So we wanted to look through the technology sector and after we looked through the top 100 markets caps in our 24/7 Wall St. Real-Time 500 we added a few new additions in the tech sector that still had over $5 billion in cash.  Out if the $335 billion from those in the top twenty, we broke out Microsoft Corporation (NASDAQ: MSFT), International Business Machines (NYSE: IBM), Apple Inc. (NASDAQ: AAPL), Google Inc. (NASDAQ: GOOG), Cisco Systems Inc. (NASDAQ: CSCO), Intel Corp. (NASDAQ: INTC), Oracle Corp. (NASDAQ: ORCL).  Even after a huge rally, $335 billion and then some could go a very long way for strategic and bolt-on acquisitions as a positioning strategy for the next decade.  Now, going further down the list of the top 100 companies with $5 billion or more in cash from tech companies alone adds in Hewlett-Packard Company (NYSE: HPQ), QUALCOMM Inc. (NASDAQ: QCOM), EMC Corporation (NYSE: EMC), and Yahoo! Inc. (NASDAQ: YHOO). When we tally up all the cash, there is over $260 billion available from these few tech companies that could be deployed for mergers, acquisitions, or the good old dividends.  Again, that is before tallying up credit lines, factoring, debt sales, and other financing methods.

Hewlett-Packard Company (NYSE: HPQ) had almost $25 billion in cash and long-term investments.  Now that it has migrated away from just selling PCs and printers, we think that there will be a rather long lull before H-P tries to match its big buyout of EDS even if Dell is tip-toeing into IT-services and consulting with Perot.  But in the end, what we think may not matter.  Nearly $25 billion in cash when you know you will be profitable ahead leaves a lot of room to go out make purchases.

QUALCOMM Inc. (NASDAQ: QCOM) was the 29th largest company as of Wednesday with a $74.12 billion market cap. If you tally up its cash, short-term and long-term investments, it is sitting on almost $15 billion in cash and equivalents as of last quarter.  After all the lawsuits that the Jacobs team are settled, it might consider a way to deploy capital to get around future patent cases.  If only it was possible, although anything is possible.”

Read the full article here.

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Here is a cleantech story by way of Bnet.

“Hours ahead of battery maker A123 Systems‘ initial public offering, optimism is already running high that the company will crack open a stagnant market and convince investors that they should also buy into other stock offerings.

A123 made an 11th-hour call yesterday to raise the price its opening price by 23 percent, to a range of $10 to $11.50. If the company gets traction it will bring in about $250 million. That’s not bad, for a firm that lost $40.7 million in the first half of the year. Its revenue was only slightly higher, at $42.9 million.

But A123 is well positioned. It started off selling batteries into the power tool market. That led to electric cars — which are not yet common on the road, by any means. The expectation is that electric vehicles will multiply rapidly in coming years; even if they don’t, A123 is also starting to make batteries for utilities, to store excess capacity from solar or wind power farms.

Battery technology also takes a long time to perfect, meaning newer competitors could take years to catch up to A123, offering some stability. So as startups go, it’s a good company to attract attention from the stock markets during a protracted downturn. The question is whether others can follow in A123’s footsteps.

I’d say “yes”, and here’s why: Investors seem to be wising up to what actually works in cleantech. When A123 first filed for an IPO last year, it was in a group of other renewable energy companies, including Imperium Renewables, a biodiesel maker. That company burned through a massive amount of cash very quickly, and is now in no position to have an IPO, or do much of anything else.

Ditto for dozens of other biofuel companies, including corn ethanol busts that did go public, like Verasun and Pacific Ethanol. But, as with the internet boom, all this simply meant that investors were still getting their bearings. It wasn’t yet evident which areas of cleantech would make for the best bets.”

Read the full story here.

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We see this as a good sign for the investment community, the willingness to invest and seek opportunity is a very good indicator that the VC industry is warming up. As M&A serves as an option to IPO, this deal and a score of other show that there is light in the end of this downturn tunnel. This article is by way of The Day.

“Dell Inc. will spend $3.9 billion for the technology services company Perot Systems Corp. in an attempt to expand beyond the PC business and compete more aggressively with Hewlett-Packard Co., which recently bought another tech-services company founded by H. Ross Perot.Dell said Monday it will offer $30 per share in cash for Perot Systems – a 68 percent premium over its closing price Friday.

Former presidential candidate H. Ross Perot Sr., now 79, serves as chairman emeritus of Perot Systems, which he founded in 1988. According to an April regulatory filing, Perot and related trusts controlled at least 25 percent of the company’s stock, though it was not clear who is the beneficiary of those shares. The company did not respond to a request for comment on Perot’s stake.

Perot had already made a fortune from founding Electronic Data Systems Corp. in 1962 and selling the company to General Motors Corp. in a 1984 deal worth $2.5 billion. Hewlett-Packard bought EDS last year for $13.9 billion as it, too, tried to augment its services offerings and diversify beyond hardware.

In a conference call with analysts, Dell’s founder and CEO, Michael Dell, said Perot Systems will serve as an “anchor” acquisition for a global information-technology services business.

Plano, Texas-based Perot Systems would bring Dell more than 1,000 customers in several sectors, including the U.S. military and the Department of Homeland Security. About 48 percent of its revenue comes from the health care industry and 25 percent from government. Last year Perot Systems earned $117 million on sales of $2.8 billion.

Dell’s services business is more basic than those of its larger competitors; Perot Systems would add more lucrative consulting and systems-integration services to Dell’s lineup.

”This would, at least from a product standpoint, put them definitely more competitive with HP and IBM,” said Kaufman Bros. analyst Shaw Wu. “It’s a step in the right direction.”

Read the full article here.

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