Archive for October, 2009

Here is an interesting article from Business Week.

“If you’re a BlackBerry (RIM) or iPhone (AAPL) user (see: addict), then you are partly responsible for the great Internet buildout. Those cute apps that look up baseball scores or let you log into Facebook eat up enough bandwidth to put the backend infrastructure of phone companies under pressure, forcing them to upgrade their networks with new and fancy gear. I’ve described this as the great Internet buildout, and it’s one of the main reasons we’re seeing a wave of mergers and acquisitions in tech land.

Equinix (EQIX), a data center provider, said on Wednesday it is going to buy competitor Switch & Data for about $689 million in cash and stock. From the release:

“Equinix will integrate Switch & Data’s data center business and operations, including the company’s 34 data centers in 22 markets in the U.S. and Canada. The acquisition will add more than 1 million gross square feet of data center capacity, bringing Equinix’s total global footprint to 79 data centers in 34 markets and more than 6 million square feet across the North American, European, and Asia-Pacific markets.”

Spending More Time on the Web

And now Tellabs (TLAB), a Naperville (Ill.)-based maker of telecom equipment, says it’s buying WiChorus, a mobile Internet equipment maker based in San Jose, Calif. Tellabs is paying $165 million in cash for the upstart company, whose venture backers include Pinnacle Ventures, Accel Partners, Mayfield, and Redpoint Ventures and which counts Clearwire among those that use its products. WiChorus’ SmartCore platform competes with the likes of Starent, which itself is in the process of being acquired by Cisco Systems (CSCO) for $2.9 billion.

What’s really going on is pretty simple: Today’s consumers are increasingly spending more time on the Web—and they’re using the mobile Web almost constantly. From my post The Great Internet Buildout Continues.

“There are 444.3 million broadband subscribers n the world, according to the Broadband Forum, and that number is only going to increase over the next few years as emerging telecom economies such as India, Brazil, and Russia ramp up their Internet efforts. A whopping 250 million people are going to connect to the Internet wirelessly by the end of 2009. Just imagine the bandwidth and computing horsepower needed if all of them started streaming movies from Netflix, listening to music by visiting Spotify, and sharing videos and photos via Facebook.”

Pressure on Mobile Networks

A Facebook executive pointed out this week that the company’s users spend a collective 8 billion minutes a day on the site. If my math is right, that’s roughly 25 minutes per user. (Facebook has 330 million users.) Like me, many are busy uploading their photos to the unstoppable social network.

As higher speeds become available on our mobile handsets, thanks to 4G wireless technologies such as LTE, we will to be spending even more time on these networks. The carriers need to make sure that these networks perform to consumer expectations, otherwise they’ll put their fast-growing data revenue stream at risk.”

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Here is a interesting article from WSJ Online.

“Twitter Inc.’s $100 million funding round drew considerable attention for its massive size, but it’s not the largest venture deal so far this year. That round actually tied for the fourth largest, according to data compiled from Dow Jones VentureSource.

Here’s a list of the Top 10 venture capital rounds through the third quarter. The deals are impressive considering the cloud hanging over the venture industry. Besides Twitter and another dot-commer, Facebook Inc., these companies range from massive clean-technology projects and health-care plays to wireless equipment makers and, in one case, a waste-collection service.

#1 Solyndra Inc., Fremont, Calif. – $286 million

The solar panel maker is on the federal government’s hot-list, receiving a $535 million loan guarantee in September to build a second manufacturing plant and create hundreds of jobs. That loan encouraged venture firms to invest at least another $198 million in Solyndra. (The company announced that amount in September though a spokesman told VentureWire the round’s total was even higher.) Argonaut Private Equity, an investment vehicle for Oklahoma billionaire George Kaiser, led the round. Others participating in the round weren’t disclosed, although Solyndra’s investors include CMEA Capital, Redpoint Ventures, RockPort Capital Partners, U.S. Venture Partners and Virgin Green Fund, which together have invested more than $600 million. Solyndra plans to finish building its plant in Fremont by the end of next year and ship its first product in early 2011.

#2 Clovis Oncology Inc., Boulder, Colo. – $146 million

In May, Domain Associates, New Enterprise Associates and others bet $146 million that former executives of cancer-drug company Pharmion Corp., which sold for $2.9 billion last year, will repeat that success with newly formed Clovis Oncology. Also participating were Pharmion investors Aberdare Ventures, Abingworth Management, ProQuest Investments and Versant Ventures, and newcomer Frazier Healthcare Ventures. Like Pharmion – which raised $145 million in venture capital and convertible debt before going public in 2003 – Clovis will acquire cancer therapies, develop them through to regulatory approval in the U.S. and Europe, and market them.

#3 Small Bone Innovations Inc., New York – $108 million

The orthopedic device company, founded in 2004, has developed a portfolio of products for thumb, hand, wrist, elbow, foot and ankle surgeries. The STAR Ankle total joint replacement system, one of Small Bone’s flagship products, received Food and Drug Administration clearance in May. The $108 million Series D round, which closed in April, included new investors The Family Office of Bahrain, Goldman Sachs & Co., Khazanah Nasional Brhd. and Malaysian Technology Development Corp. and existing investors 3i Group, Axiom Venture Partners, NGN Capital, TGap Ventures and Trevi Health Ventures. Executives told VentureWire they expect Small Bone to reach profitability in 12 months, and unlike many medical device companies which become acquisition targets, could grow into a full-fledged company in its own right.

#4 (Tied) A123 Systems Inc., Watertown, Mass. – $100 million

The electric-car battery maker’s initial public offering last month captured investors’ imagination – and wallets – with a vision of a future where power is stored intelligently and deployed efficiently in a world of lower carbon emission. Before the IPO, A123 Systems gathered $100 million in Series F funding in June from investors Gururaj Deshpande, General Electric Co., North Bridge Venture Partners and Qualcomm Inc. A123 also received a $249.1 million grant from the U.S. Department of Energy grant, the second-biggest awarded as part of a $2.4 billion program to start up a domestic battery industry. The company, which has a deal to supply Chrysler Group LLC with batteries for planned electric vehicles and hybrids, is said to be in the late stages of negotiations for another DOE loan worth as much as $235 million.

#4. (Tied) Facebook Inc., Palo Alto, Calif. – $100 million

Facebook recently reached an important milestone for an Internet company, becoming cash-flow positive as it also grabbed its 300 millionth member. Will an IPO be coming soon? Executives won’t say, but the company’s investors are counting on a spectacular exit at some point given how much money they’ve invested over the years. One of the newest investors is Digital Sky Technologies, a Russian Internet investor that put $100 million into Facebook in July while also paying another $100 million to buy out shares of any selling employees.

#4 (Tied) Open Range Communications Inc., Greenwood Village, Colo. – $100 million

One Equity Partners committed $100 million to Open Range at the start of the year to help it roll out wireless broadband and Internet services in rural America by the end of the year. The deal followed a $267 million loan from the U.S. Department of Agriculture’s Rural Development Utilities Program. Founded in 2004, Greenwood Village, Colo.-based Open Range hopes to reach more than six million Americans in 546 underserved and rural communities across the U.S. lacking access to traditional DSL or cable broadband service providers. Open Range plans to use WiMAX technology to enable access to its planned wireless service with a simple plug-in device.

#4 (Tied) Twitter Inc., San Francisco – $100 million

At a $1 billion valuation, Twitter’s $100 million fourth round proved the Web messaging company is here to stay, at least longer than some thought. The funding came from some unlikely sources, including T. Rowe Price Group, better known for its retirement funds than venture capital investing, Morgan Stanley, which invested from its asset management business, and Insight Venture Partners, a growth-equity investor that doesn’t typically put money in pre-revenue companies. Other investors in Twitter include Benchmark Capital, Institutional Venture Partners, Spark Capital and Union Square Ventures, which didn’t reinvest in the latest round reportedly because the deal priced the firm out. Now the pressure will be on for Twitter to live up to the hype.”

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Here is an interesting piece on mergerlaw from IT Business Edge.

“More frequently than not these days, when two companies operating in the same market space agree to merge or to engage in a strategic partnership, the U.S. Department of Justice or the Federal Trade Commission, or even both agencies, are going to want a closer look. Take Oracle’s acquisition of Sun Microsystems, and the Microsoft-Yahoo agreement in the search arena, for instance. The agencies want to make sure the merger, acquisition or partnership is not going to have an anti-competitive effect on the market such that consumers will be adversely affected.

The number of these inquiries has risen, and will continue to rise in the next few years, I’d imagine, because the Obama Administration has pledged to get serious about antitrust violations. That pledge has garnered mixed reviews, especially in the tech industry, as you can see in this post by our Rob Enderle. I don’t have Rob’s years of experience watching these things unfold, but I don’t know that I would go to such extremes. Yes, the new administration appears to be taking a more hands-on approach in enforcing the law, but at least the agencies responsible are also evaluating whether the guidelines they use to do so are still up to par.

Last week, Compliance Week’s Melissa Klein Aguilar reported that the DoJ and the FTC are considering whether the guidance they use in evaluating the anti-competitive effects of proposed horizontal mergers and acquisitions need updating. To that end, they are asking the public to respond to a 20-question survey on the matter.”

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Here is a good piece from WSJ Online.

It’s well known as a major investor in wind- and solar-energy projects. But General Electric Co. also hopes its growing role as a venture capitalist will give it an edge in a broader spectrum of emerging green technologies.

Since its first investment, in lithium-ion battery maker A123Systems Inc. in January 2006, the venture-capital group at GE Energy Financial Services has put $160 million into a portfolio of 20 companies focused on renewable energy, power-grid and energy-efficiency improvements, and, to a lesser extent, advanced oil and gas technologies.

GE sees these later-stage, clean-energy start-ups as a way to get a sneak peek at emerging technologies. Through its venture arm, it also gets a piece of the ones it believes will be ahead of the pack in the global shift to a reduced-carbon economy.

Kevin Skillern, the VC group’s managing director, says it’s too early “to tell if we’ve turned one dollar into two or three dollars.” But at GE, there’s another key metric: technology. Mr. Skillern says GE is also interested in how the portfolio companies can help its businesses.

“This is a vehicle that provides our larger company with a window into what could be a $15 billion to $20 billion industry in emerging energy technologies,” he says.

Mr. Skillern, who grew up in Houston and worked for more than a decade in the oil industry, got his M.B.A. at Stanford University in Palo Alto, Calif. He went back to the oil patch after he graduated, at a time when many of his classmates were pursuing Internet start-ups. But the seed of venture investing had been planted, and GE Energy Financial Services’ venture capital was the perfect new patch to let it grow.

We met with Mr. Skillern at GE Energy Financial Services’ offices in Stamford, Conn., to discuss how the large conglomerate is influencing the clean- technology industry through its venture investing. Excerpts from that conversation follow.”

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Here is a good interview from All Things Digital.

“Dell’s acquisition of Perot Systems, the largest in the company’s history, is the first of many such deals, not a simple one-off. In an interview with Bloomberg, company CEO Michael Dell said the PC maker is eyeing more acquisitions as it looks to bolster sales to corporate clients.

“You will see us be reasonably active,” he said. “We have a talented team of people that includes people who have been at Dell a long time and understand the Dell culture in the transactions that we’ve done and know why those have succeeded or not. We are rapidly developing that, and we’ve added some talent to help us do that.”

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