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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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Here is a good article from SF Chronicle that sheds some light on Apple and its renewed strategy on Mobile devices. With its launch of iPad, as well as the consious sidestepping from flash, a new and clear focus on iTunes and Appstore becomes much clearer – the focus on being the entertainment and content provider of consumer entertainment, and controlling the accesspoints secures large revenues from the convert. The larger question is if there are new areas previously untapped in this strategy that represent next level. With clear focus on casual consumption, everyday content and easy access, I have problem seeing next product line within this strategy.

– Patric

“Apple’s recent unveiling of the iPad was primarily a product announcement aimed at priming the pump for consumers, developers and content owners.

But for the notoriously secretive company, the iPad event provided observers with a glimpse of the company’s growing ambitions and strategies.

By trumpeting its own chipset for the iPad, passing on Adobe Flash software and putting even more emphasis on its iTunes system, Apple appears intent on tightening its command over the user experience and delivering a distinct vision of mobile computing, Internet connectivity and media consumption.

But perhaps the most obvious upshot of the latest unveiling was Apple’s continued recognition that its future, unlike its origin, is tied to mobile devices. Three years after dropping the word “computer” from its name, Apple’s CEO Steve Jobs said the company’s annual revenue of $50 billion from iPhones, iPods and MacBook laptops make it the largest maker of mobile devices in the world.

“Apple is a mobile devices company – that’s what we do,” said Jobs, during the iPad event.

Tim Bajarin, president of technology consultancy Creative Strategies, said Apple recognizes that the computing landscape is expanding to a model in which everyone carries around an Internet device. With the iPad, Apple is seeking to shape and stay ahead of that future.

“Apple’s role is to bring digital technology to the masses,” said Bajarin. “They don’t believe it’s restricted to a desktop or a phone – it should come in all types of devices.”

While the iPad represents a new hardware market, some observers see the device as expanding Apple’s business in services and content delivery.

“In 10 years, Apple will be just as much of a services and a software play as a device manufacturer,” said J. Gerry Purdy, an analyst with MobileTrax, a mobile research firm. “I think that gives them a tremendous playing field opportunity.”

Making chips itself

Apple’s introduction of its own chipset for the iPad – called the A4 – suggests that the Cupertino company is even more focused on the marriage between its hardware and software, eschewing third-party chips that are used by most rivals.

Nathan Brookwood, an analyst with Insight 64, questioned whether Apple’s chipset will outperform rival technology from Nvidia or Qualcomm. But he said the approach can result in some savings if it’s applied on a significant scale. And it allows the company to be less dependent on outside suppliers.

But perhaps most importantly, it gives Apple a way to tune its chips to fit the exact needs of its devices and software, allowing the company to achieve better performance and battery life.

“Apple’s gone from buying something off the rack to buying something where they have the pieces and they can tailor it themselves to their unique body shape,” Brookwood said.

Brookwood said he expects to see more of the A4 chipset if the iPad proves successful.

Apple’s iPad announcement also revealed a deeper antipathy toward Adobe Flash, the ubiquitous browser plug-in that enables most of the video and animations you see on the Web.

At the press event, Jobs avoided any mention of Flash, even when selling the iPad as delivering the Internet in your hand. And at a company staff meeting a few days later, Jobs reportedly called Adobe’s browser plug-in “buggy” and said the world will be moving to HTML5, a new Web language that will eliminate the need for Flash in many instances.

Tech pundits said Apple’s crusade against Flash appears to be philosophical, practical and political. The opposition might be a way to steer consumers to Apple’s iTunes and App Store, where they can find video content and applications that replicate the Flash content, often at a price.

“Apple’s position is they want to move things off the Web to the (iTunes) App Store,” said David Wadhwani, vice president and general manager of Adobe’s platform business. “Our position is we will support both models and let the consumer choose.”

Flash the next floppy disk?

Apple also appears reluctant to allow San Jose’s Adobe access to its iPhone operating system, especially when its Flash software is the cause of most of its crashes on the Mac, a claim Jobs reportedly made at his staff meeting. By advocating HTML5, Jobs could be attempting to help precipitate the decline of Flash, something he also predicted with floppy disk drives and more recently optical drives, wrote Farhad Manjoo, a technology columnist for online magazine Slate.

“Jobs could be betting that the same thing will happen with Flash,” Manjoo said. “There will be a lot of whining in the short run, but in time, we’ll all forget we ever wanted it and keep buying iPads.”

With Apple’s decision to go with the iPhone operating system, instead of Mac OS X or a hybrid, the company seems even more intent on using it as a major platform for mobile development. Apple has outpaced rivals in the mobile application market with more than 140,000 apps, but it has faced increasing competition from Google’s Android, which is also being pitched as a tablet operating system.”

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Here is some good market analysis in regards to topics we covered earlier in the week by way of ITWorld.

“September 17, 2009, 07:33 PM —  IDG News Service —

Optimism about IT helped boost stock exchanges to 2009 highs this week as tech-sector mergers and acquisitions and news about improving demand for hardware buoyed investor confidence.

The tech-heavy Nasdaq Composite index hit 2133 on Wednesday, its highest level for 2009, well above the 1630 mark at the start of the year and its low of 1268.64 on March 9. Nasdaq computer stocks were up 50 percent for the year, while Nasdaq telecom stocks were up 48 percent for the year. The broader Dow Jones Composite Index was up 10 percent for 2009.

M&A activity has fueled investor excitement about the tech sector. While the recession has killed the market for leveraged buyouts and private equity deals this year, there has been a steady stream of acquisitions among tech companies, many of which have large coffers of cash.

In one of the larger tech deals announced recently, Adobe said late Tuesday it will acquire Web analytics company Omniture for US$1.8 billion in cash. Adobe said it will incorporate Omniture technology into its own Web-development and document-creation products. Adobe is paying a 45 percent premium over Omniture’s share price, which may account for the immediate reaction to the deal: Adobe shares slipped by $2.27 to close at $33.35 Wednesday.

However, M&A often stokes investor excitement because it is seen as a sign of industry confidence in certain technologies. Vendors will buy companies in order to quickly ramp up in areas of technology that they believe are taking off.

For example, Intuit — the leading personal finance software developer — on Monday announced it would pay $170 million for startup Mint.com. Though Intuit has successfully battled Microsoft Money for years, the company has not had a response to various Web-based financial tools that have sprung up lately. Mint offers free tools to help consumers gather and analyze personal financial information. While Intuit shares dipped by $0.07 to close at $27.78 Tuesday, they bounced back up to $27.89 Wednesday.”

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Adobe´s innovation through aquisition continues, next in line is Omniture. On a larger scale, this indicates a growing market optimism that the time is right for investments. This article is by way of Bloomberg.

“Sept. 16 (Bloomberg) — Adobe Systems Inc., the world’s biggest maker of graphic-design software, agreed to buy Omniture Inc. for $1.8 billion, expanding into programs that track the performance of Web sites and online advertising campaigns.

Adobe will pay $21.50 a share for Omniture, 24 percent more than the closing price yesterday. Adobe fell as much as 4.9 percent in extended trading after announcing the acquisition and forecasting sales that missed some analysts’ estimates.

Chief Executive Officer Shantanu Narayen is pushing Adobe into new businesses at a time when customers are pulling back on purchases of the company’s design software. Omniture gives Adobe a steady source of revenue and may mean investors will focus less on periodic upgrades to products such as Adobe Creative Suite, said Michael Olson, a Minneapolis-based analyst with Piper Jaffray & Co.

“Adobe is trying to diversify beyond being just a maker of development tools,” Olson said. “Any time you do a big acquisition, the acquirer’s shares are down because of the element of risk that some investors aren’t comfortable with.”

Others offering opinion on the topic include: Barrons, Zikkir, Econsultancy, Seeking Alpha.

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Here is an interesting article by Aaron Pressman at BusinessWeek.

“The conventional wisdom used to be that investors should run from technology companies that did too many mergers and acquisitions. But over the past decade, a group of top-tier tech wheelers and dealers has emerged that increased shareholder value with their acquisitiveness. Companies such as Oracle, IBM, and Adobe Systems have successfully used acquisitions to get into new lines of business, expand their customer bases, and grab hot new technologies. Still, some companies consistently overpay or buy yesterday’s big breakthrough. An informal survey of tech fund managers, analysts, and consultants yielded a list of companies investors will likely favor on more deal news—and a few they may shun.

Once mainly a hardware vendor of computers large and small, IBM (IBM) has used a sharp acquisition strategy to expand into software and information technology services. After a string of successful additions, including performance management software maker Cognos, and Rational, which makes tools to help programmers write code, IBM announced in July it would pay $1.2 billion for SPSS, a leading developer of software to analyze statistical data. “All the software acquisitions have helped shift the company toward higher margins and faster growing areas,” says Ken Allen, manager of the T. Rowe Price Science & Technology Fund. IBM was his 15th largest holding as of June 30.

Salesforce.com (CRM) has always been a poster child for the move from desktop applications to Web-based products. As more computing and data storage have migrated to online servers—the clouds in “cloud computing”—Salesforce has used a series of small acquisitions to keep pace. In 2006 it grabbed wireless software developer Sendia, for example, helping make all its offerings available over mobile phones. “They’re doing a good job of pushing each acquisition into their services,” says Jeff Kaplan, founder of tech consulting firm Thinkstrategies.

Cisco Systems (CSCO) is the king of bolt-on acquisitions. In a typical deal, Cisco purchases a much smaller company, such as voice-over-Internet gearmaker Sipura, which it bought for $68 million in 2005. Then it uses its manufacturing smarts and sales force to promote cutting-edge products that often fit into existing lines of business. Cisco also uses purchases to diversify and get into new businesses. This year it added Pure Digital Technologies, maker of the Flip digital video camera. “Their goal is to become a larger player in the consumer electronics and networking business,” says Ned Douthat, an analyst at Ockham Research in Roswell, Ga.”

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