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Posts Tagged ‘Cisco’

The End: Cisco Shuts Down Flip, a $590 Million Mistake

Posted in Board Of Intellectual Capital, Business models, Distressed IP, Economy, Gerbsman Partners, Investments, Market research, Strategy, tagged , , , , , , , , , , , , on April 14, 2011| Leave a Comment »

Article from GigaOm.

“Cisco is giving up on its barely two-year-old $590 million purchase of Pure Digital Technologies, announcing today that it is closing its Flip business unit and cutting 550 employees as part of a larger restructuring. The move comes after clear signs that the outsized deal was not paying off for the technology giant, which is in the midst of refocusing its business on its core networking business.

Cisco said it will close the Flip business, but will continue to support current Flipshare customers who upload and share media to the web. Cisco said it will also refocus its Home Networking business to make it more profitable and connected to the company’s networking infrastructure. It will also move Umi, its consumer Telepresence, into the business Telepresence line and sell it through an enterprise and service provider go-to-market model.

“We are making key, targeted moves as we align operations in support of our network-centric platform strategy,” CEO John Chambers said in a statement. “As we move forward, our consumer efforts will focus on how we help our enterprise and service provider customers optimize and expand their offerings for consumers, and help ensure the network’s ability to deliver on those offerings.”

The closure of the Flip unit comes a couple months after former Pure Digital CEO Jonathan Kaplan left Cisco, prompting questions about the direction of the Flip line of video cameras. Cisco bought Pure in March of 2009, saying the purchase was about extending its presence into the consumer electronics business. The company was also looking to use Pure’s smarts in simple consumer electronics design to rework its home networking business. While the deal has helped Cisco create a new line of more consumer friendly home routers, it didn’t really change the company much, a task that Om mentioned recently is incredibly hard for large companies. And it hasn’t resulted in a big revenue driver in video cam sales.

That’s because while Flip grew fast with its single purpose design, which managed to move millions of units, its continued growth was checked by the rise of smartphones that can increasingly shoot HD video while offering more wireless sharing options, something Flip’s camera’s never included, an irony for a networking company. Another new consumer business, Umi, a home video conferencing product, has also failed to capture a lot of buzz, in part because of its high price. With Kaplan headed toward the door, we speculated that the deal for Pure had turned into a flop.

Now it appears that Cisco is making that conclusion official. CEO John Chambers earlier this month laid out a major reorganization for the company in a memo to employees outlining how the company would refocus on five areas: core routing, switching and services; collaboration; architectures; and video. While Chambers said Cisco would still focus on video, it appears he was not referring to Flip. This deals a major blow to the idea of a single-purpose simple video cam, which may still have a niche place in the market. But while Cisco jettisons Flip, and admits defeat, the move shows the company is clearly serious about retrenching and getting back to basics.”

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Tech jobs rebounding, analysts say

Posted in Board Of Intellectual Capital, tagged , , , , , , , , , , , on December 9, 2010| Leave a Comment »

Article from SFGate.

“Tech jobs are coming back after hitting bottom early this year, according to economy tracker Moody’s Analytics. The U.S. economy has added 47,000 technology jobs so far this year amid resurgent demand for tech products in Asia and Latin America.

That represents 15 percent growth in tech jobs, compared with an 11 percent jobs growth in the economy overall since the beginning of the year, according to Moody’s. Since a peak at the end of 2007, the tech industry had lost 307,000 jobs nationally in the economic downturn.

“It seems like this industry is embarking on a new growth spurt,” says Sophia Koropeckyj, a managing director for Moody’s Analytics. “Tech jobs seem to be accelerating.”

Asia and Latin America’s demand for tech products has resulted in new hiring and is one contributor to the recovery, Koropeckyj says. After slumping in the first half of 2009, global PC shipments – bread and butter of U.S. companies Hewlett-Packard, Dell and Apple – should rise 14.3 percent this year, to 352 million units, according to consultant Gartner.

Billions in government stimulus funds have spurred recent purchases by agencies and businesses, such as those building out broadband networks. Corporate and government information technology spending should rise 8.1 percent this year, to $758 billion, according to consultant Forrester Research. Already, networking gear maker Cisco Systems saw sales for its fiscal first quarter ended Oct. 30 rise 19 percent from a year earlier, to $10.75 billion.

“The first wave of growth is going through,” says Andrew Bartels, a vice-president at Forrester.

But the recovery may be uneven: During Cisco’s quarterly earnings call in November, Chief Executive Officer John Chambers mentioned several challenges the company faces, such as slower-than-expected pickup in orders from government agencies in the United States and Japan.

Recovery among Detroit’s automakers, helped by a government bailout, is driving a resurrection of related tech-sector jobs. Last year, Detroit experienced a 15 percent drop in high-tech jobs from a year earlier, according to a new study from technology industry association TechAmerica Foundation, which studied jobs and wages data for the 60 U.S. cities with the highest proportions of tech jobs.

Detroit’s was the worst drop in high-tech jobs among any of the 60 cities last year. But in a Dec. 1 blog, carmaker Chrysler announced it will hire 1,000 more engineers and other high-tech workers by the end of the first quarter of 2011. The company has hired 5,000 workers overall since emerging from bankruptcy in June 2009. In November, rival General Motors said it will hire 1,000 engineers and researchers in Michigan in the coming months to help expand its lineup of electric cars, whose sales are expected to climb.

In some technology industries, salaries are starting to inch back up again.

Information, media, and telecommunications professionals have seen their wages rally slightly this year, according to survey data from PayScale, which tracks global compensation. In 2009, high-tech salaries nationwide slipped 0.8 percent, which was less than the decline in the private sector overall, where the average salary dropped 1.4 percent, according to the TechAmerica report.

“The gap has widened. It’s significant,” says Josh James, vice president of research and industry analysis at TechAmerica. “Especially in hard times, companies are trying to cut costs, and one way to do that is to implement technology solutions.””

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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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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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