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Archive for October, 2010

The Big 11 Tech Acquirers

Posted in Board Of Intellectual Capital, Distressed IP, Economy, Gerbsman Partners, Intellectual capital, Investments, Market research, Strategy, Technology, Venture Capital, tagged , , , , , , , , , , , , , , , , , , , , , , , , , , on October 19, 2010| Leave a Comment »

Article from GigaOm.

Fundamental changes in networking and computing are shaking things up in the enterprise IT world. These changes, combined with ubiquitous broadband and new devices like smart phones and tablets, are leading to new business models, new services and shifts in corporate behavior. It’s also leading to a lot of M&A activity as companies jockey for position before the ongoing technology shift settles into the new status quo.

A report out today from Deutsche Bank lays out some of the shifts and names what it believes are the 11 most likely acquirers, calling those companies the Big 11. The bank’s Big 11 are: Apple, Cisco, Dell, EMC, Google, HP, IBM, Intel, Microsoft, Oracle and Qualcomm. They were selected because of their size, their cash balance and their willingness to make strategic acquisitions. The report talks about which companies each might acquire, but it also gives a wealth of data on the companies which comprise the Big 11 that any startup looking for a buyer on the software and infrastructure side might find worthwhile.

In addition to the information on buyers, the report goes on to explain why many deals today are valued at multiples that are so much higher than the potential revenue of the company (HP’s buy of 3PAR is a prime example of this trend):

On the other hand, the multiples paid for these companies go counter to typical expectations for valuations. All of these deals were priced at considerable premiums to forward estimates. The implication is that the larger companies believed that there were strategic benefits far in excess of the smaller companies’ near-term prospects. A common criticism of acquisitions holds that management teams of large companies try to buy revenue and earnings to offset far lower growth rates in their core businesses. This does not appear to be the case with these deals. We see this as confirming our thesis that large companies are looking to buy technology and product synergies. In all of these deals, we see larger companies either significantly building up weak product lines or looking for the ability to bundle new features into existing equipment.

Some of the 50 targets mentioned are:

  • Salesforce.com (s crm )
  • VMware
  • Adobe
  • Citrix
  • Research In Motion
  • Riverbed Technology
  • SAP
  • Atheros
  • Skyworks
  • f5 (sffiv)
  • Juniper

Each are on the list of potential candidates for different reasons associated with improving the quality and speed of delivering web-based applications and services from a cloud-based infrastructure to a multitude of devices. However, there are plenty of startups and private companies that are pioneering new technologies in these areas which are also fair game. The report doesn’t go into the content side of the business where companies like Google, Facebook, Apple, Disney, etc. are fighting for features and services to expand their reach and platforms.

Since we’re living through an enormous period of potential disruption thanks to technology, the giants in the industry find themselves playing a game of musical chairs as they seek the best seat at the table for the future. Startups and larger public companies that will help those giants fill out their offerings before the music stops are under the microscope and perhaps at the top of their valuations.”

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Is EMC the Next Step in Oracle’s Journey to $100B?

Posted in Board Of Intellectual Capital, tagged , , , , , , , , , , , , , , , on October 18, 2010| Leave a Comment »

Article from GigaOm.

“Oracle bought Sun Microsystems, hired former HP CEO Mark Hurd and declared that as “Oracle continues to grow, we need people experienced in operating a $100 billion business,” and ever since, the technology world has waited to see what other acquisitions Larry Ellison might have up his sleeve. This past week, we saw strong reactions to the rumor that Oracle might make a bid to buy EMC, due to the acquisition’s outlandish nature and monetary mismatch. Oracle will need to more than triple its revenue to reach that $100 billion target, so anything is possible.

That said, the rumor whips up a bunch of financial questions, because EMC owns 80 percent of VMware. EMC has a market capitalization of around $43 billion, and VMware around $32 billion. Match that up with EMC’s annual revenues of around $15 billion and VMware at $2.4 billion, and it isn’t hard to figure out where most of the value is, as well as where Oracle might be able to get a good deal on the multiple leading storage platforms.

So yes, the idea of Oracle buying EMC and VMware is a little crazy. But the idea of buying EMC and not VMware is within the realm of possibility, at least on paper, with The Register estimating that the non-VMware portion of EMC could be worth as little as $7.9 billion.

This is where things get interesting. The industry appears to be pushing towards server, network and storage consolidation following the moves of HP, IBM, Cisco, and Dell. Even Oracle has pushed a complete hardware and software package with Exalogic and Exadata using technology from Sun Microsystems to deliver an integrated solution. EMC and Network Appliance remain the large pure-play storage companies that could add significant heft to a server vendor that wants to dominate integrated stacks. HP and IBM have too much product overlap, and Dell can’t afford EMC, so that leaves an opening for Oracle and Cisco.

It seems likely that Oracle could be considering an EMC-only bid. I’ve heard some speculate that the reason Oracle became so tied to NetApp for certain solutions was the fear of EMC data center account control. Make no mistake; EMC knows how to close big deals, as their revenue number proves. If the goal for Oracle is to reach $100 billion, NetApp wouldn’t help them as effectively. NetApp currently has an $18 billion dollar market cap and just over $4 billion in revenue.

With Oracle, and potentially Cisco, interested in looking at a the EMC part of the equation, there could be impetus to move this deal forward. Even though Sun had plenty of great storage technology, they never had the commercial product success and storage revenues of EMC. If consolidation between servers and storage is the future, EMC better get cozy with someone soon.”

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IVP Woos Hot Web Companies Before They Grow Old

Posted in Board Of Intellectual Capital, tagged , , , , , , , on October 17, 2010| Leave a Comment »

Article from WSJ Venture Dispatch.

“If you think early-stage investing is the only place to be in venture capital, you haven’t been paying attention to Institutional Venture Partners.

Although it’s a senior citizen in VC with 13 funds to its name, the late-stage investor is behind two of the Web’s hottest companies, Twitter Inc. and Zynga Game Network Inc.

And while many firms struggle to hit fund-raising goals, IVP recently closed a new fund at $750 million, its largest ever, blowing by a $600 million target.

Its partners think that’s because this is exactly the right time for its strategy as the road to exiting has grown longer and early investors and founders look for liquidity.

Although the firm is not lacking competition, “the supply-demand relationship in the late stage is quite attractive,” said General Partner J. Sanford “Sandy” Miller. Fund-raising data support this view: Early-stage and multi-stage venture firms raised $3 billion and $3.98 billion, respectively, in the first half of this year, according to Dow Jones LP Source; late-stage specialists raised a mere $500 million (this amount does not include IVP’s latest fund, which closed in the second half of this year).

Miller, who joined IVP in 2006 from London-based 3i Group PLC, and before that co-founded investment bank Thomas Weisel Partners, said that although public offerings are again “a feasible alternative,” they will remain a small percentage of venture capital exits compared with M&A. Strategic acquisitions will provide the best exits for VCs as technology companies deploy their “unprecedented war chests,” Miller said.

Meanwhile, many technology companies, especially those employing the software-as-a-service model or in digital media, are investing aggressively to drive growth. IVP initially invested in both Twitter and Zynga in 2008 when they raised second rounds. Late-stage investors traditionally invest in third or later rounds.

IVP General Partner Dennis Phelps said Internet companies, because they can be launched cheaply, often can tap the late-stage market after raising little previous capital. For example, IVP in March led a $10 million Series B round for New York-based DoubleVerify Inc., which runs a brand-protection service for online advertisers and had raised $3.5 million from investors previously.

The DoubleVerify investment also illustrates another trend in the late-stage market as IVP, besides injecting fresh capital, bought Series A shares from an angel investor who was looking for liquidity. Miller said such transactions are more common now, although it is usually founders or management selling shares. Not only is it a way for IVP to boost its ownership stake in the company but it also can relieve financial pressure on company executives who otherwise might have to wait a decade to get money out of the business.

Recent IVP funds have performed well. Its 10th vehicle, raised in 2001, had an internal rate of return of 7.4% as of March, according to data from investor California Public Employees’ Retirement System. Its 12th fund, closed in 2007, had a 28.4% IRR as of March, according to California State Teachers’ Retirement System.

“We’re looking for the emerging winners,” Miller said of IVP’s investment strategy. “If you wait too long, they’re no longer emerging and they’re just very expensive situations.””

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By the Numbers: Seed Funding Is the New Black

Posted in Board Of Intellectual Capital, tagged , , , , on October 13, 2010| Leave a Comment »

Article from GigaOm.

“If Angelgate didn’t prove it, then the following data will; there’s a tinge of mania when it come to early- and seed-stage funding. The latest data from CB Insights, a market research firm that tracks the venture capital industry, shows that seed investments — primarily in Internet startups — increased from a mere one percent of all deals during the third quarter of 2009 to a whopping 11 percent of total venture investment deals during that period in 2010.

The sharp increase in seed-stage investments is the sole reason the total number of venture investments jumped during the third quarter of 2010 even though overall funding dropped. Nearly $5.4 billion was invested in 715 deals during that time frame, CB Insights’ data reveals. All that essentially made for one hot summer.

Here is some salient data from CB Insights’ latest report covering the July – September time frame:

  • Nearly $1.253 billion was invested in 233 Internet related deals. Series A media deal size was at an all time high of $3.4 million, once again proving that early stage investing is going through a frothy phase.
  • San Francisco saw 36 Internet deals that brought in $131 million, while New York City saw 31 Internet deals garner $126 million. In comparison, Mountain View, Calif., San Mateo, Calif. and Palo Alto, Calif. saw 21 deals focused on the Internet and they brought in a total of $174 million.
  • Early-stage investing is dominating the New York area and accounted for nearly 63 percent of all deals. New York can thank folks like Chris Dixon and Fred Wilson for bringing investment dollars to area startups.
  • Massachusetts saw a year-over-year decline in amount VCs invested during the third quarter of this year: $466 million was invested in 87 deals versus 73 deals which garnered $596 million during the third quarter of 2009.”

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HP, Oracle lead spree breaking tech barriers

Posted in Board Of Intellectual Capital, tagged , , , , , , , , , , , , , on October 11, 2010| Leave a Comment »

Article from SF Gate.

“Hewlett-Packard Co., Oracle Corp. and IBM Corp. are leading an acquisition spree that has propelled the value of U.S. technology deals 24 percent to more than $50 billion this year and broken down decades-old barriers between industries.

The companies are using purchases to become one-stop providers of products from computers to software to networking gear, rather than focusing on a niche. A plunge in computing-industry stocks last week, spurred by concerns that demand is slowing, makes some companies more affordable.

HP, Oracle, IBM, Cisco Systems Inc. and Dell Inc., with a collective $100 billion in cash, have said they plan to keep making acquisitions. Buyers will probably scoop up targets in areas such as storage, software and security, helping them cater to corporate customers building data centers to handle a Web traffic boom, said Charles King, principal analyst at research firm Pund-IT in Hayward.

“A lot of tech leaders are repositioning themselves,” said Drago Rajkovic, head of technology mergers at Barclays Capital in Menlo Park. “Tech merger and acquisition activity is going to remain very strong this year and going into next year.”

Companies have announced $51.9 billion worth of technology and Internet takeovers in the United States this year, up from $41.8 billion in the same period in 2009, according to data compiled by Bloomberg. The buyers are pursuing a vision of cloud computing, which lets customers store their software in massive data centers, rather than in the computer room down the hall. Record low borrowing costs have helped spur the deals.

To build up its data-center technology, Hewlett-Packard agreed to spend $2.35 billion last month for the money-losing Fremont storage maker 3Par Inc., after an 18-day bidding war with Dell more than tripled 3Par’s stock price. Shares of other potential targets, such as Riverbed Technology Inc., Isilon Systems Inc. and Fortinet Inc., have each climbed more than 25 percent since the bidding for 3Par was made public.

Project California

Cisco’s expansion into computing hardware has put pressure on HP, IBM and Dell, the leaders in that industry, to respond. Cisco, the world’s biggest maker of networking equipment, introduced its own line of servers in March 2009. The effort, originally code-named Project California, is beginning to gain acceptance from big customers, says Dominic Orr, chief executive officer of one of Cisco’s networking rivals, Aruba Networks Inc.

“That’s creating a lot of nervousness,” Orr said. “Nobody wants to be Californicated by Cisco.”

The acquisitions are a boon to the largest investment banks. Goldman Sachs Group Inc. has advised companies in more than 30 percent of U.S. technology deals this year, according to data compiled by Bloomberg. Morgan Stanley and Barclays Capital ranked second and third.

The price HP paid for 3Par was about 10 times the company’s revenue over the past four quarters. The premium reflected a growing urgency to use acquisitions to fuel growth and underscores the dearth of affordable runners-up.

“The public markets are pricing in premiums that, frankly, are going to prevent some deals from happening,” Cisco Senior Vice President Ned Hooper, who handles corporate business development, said. “The companies that are winning in the market are responsible players.”

Oracle, the world’s second-largest software company, snapped up almost 70 companies in the past five years. In January, it bought Sun Microsystems Inc., marking a foray into computer hardware. Last month, it used the acquisition to introduce high-end servers designed to run Oracle programs faster than competing machines.

Oracle CEO Larry Ellison has pledged to acquire more hardware companies, especially in the chip area. While HP and Dell use processors from Intel Corp. in their servers, Oracle plans to build out Sun’s proprietary chip technology.”
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