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Posts Tagged ‘Cisco’

Tech Titans Holding $260 Billion In Cash

Posted in Board Of Intellectual Capital, tagged , , , , , , , , , , , , , , , , , , on September 25, 2009| Leave a Comment »

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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Investing in Technology M&A

Posted in Board Of Intellectual Capital, tagged , , , , , , , , , , on September 11, 2009| Leave a Comment »

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.”

Read the full article here.

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Zappo provide returns for Sequoia

Posted in Board Of Intellectual Capital, Business models, Economy, Gerbsman Partners, google, Investments, Market research, Strategy, Venture Capital, tagged , , , , , , , , , , , , , , , , on July 27, 2009| Leave a Comment »

Here is a good VC article from Alibaba.

“BURLINGAME, Calif. — Marc Andreessen, in a recent Forbes interview, noted there are hundreds of venture-capital outfits slogging it out right now, trying desperately to squeeze profits out of a terrible investing environment–but only a handful worth their salt.

He’s right. And this week’s news that Amazon.com ( AMZN – news – people ) would buy online-shoe retailer Zappos for $807 million in Amazon stock, plus some cash, highlights the staying power of one of those perennial Sand Hill Road stars, Sequoia Capital.

Sequoia is the notoriously tough firm that backed winners like Google ( GOOG – news – people ), Apple ( AAPL – news – people ), Cisco ( CSCO – news – people ), YouTube and PayPal. (I could go on.) It also owned a big chunk of Zappos, a company with a somewhat unlikely business model that excelled by providing unparalleled customer service and shoe selection on the Web. Sequoia recently told its investors it put about $48 million into Zappos and will get just over $169 million from the Amazon transaction. That’s not a “home run” in VC parlance. But it’s a very respectable return of about three-and-a-half times Sequoia’s original investment, particularly in these depressed times.

In the first six months of this year, there were only four tech-related M&A deals of over $100 million involving companies that took venture capital, according to Thomson Reuters and the National Venture Capital Association. (There were a few VC-backed IPOs in the first half, too, but no blockbusters.) The biggest of the tech M&A deals, Cisco Systems‘ $590 million purchase of camcorder maker Pure Digital Technologies, also involved Sequoia, which owned a small stake.

Sequoia’s profits from that deal were very small, but it still made a nice return: Sequoia told its investors in March that it invested just over $1.4 million in Pure Digital and would receive $13 million in Cisco shares and $1 million in cash after the acquisition. (The biggest VC-related deal in the first half of this year was Medtronic’s ( MDT – news – people ) $700 million purchase of CoreValve, a company with a new catheter technology to improve heart-valve replacements. Sequoia doesn’t do health care investing.) Plenty of other VCs have sold companies in fire sales this year for less than what investors put into them.”

Read the whole article here.

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Oracle to buy Sun Microsystems

Posted in Board Of Intellectual Capital, Investments, Java, Market research, Strategy, Sun Microsystems, tagged , , , , , , , , , on April 20, 2009| 1 Comment »

After the deal with IBM feel through, Oracle did not wait long before aquiring Sun Microsystems. This article from San Jose Mercury News gives a throurough analysis. Here are some selected shorts from the story:

“Oracle will pay $9.50 per share for Sun’s stock, the two companies announced this morning. That is slightly higher than the price that IBM reportedly offered after lowering its bid in the days before those talks collapsed. The sale of Sun to Oracle means a powerful combination of two software giants, but also could represent a new direction for Oracle. It could potentially create a new force for competition in corporate datacenters, where companies like IBM, Hewlett-Packard and Cisco have been competing to offer a wide range of hardware and software products.”

“In a joint conference call, Oracle president Safra Catz said the deal will add at least $1.5 billion in annual income to Oracle from the start. She stressed that the combined companies will be able to operate profitable and noted that Oracle has a track record of successfully integrating other large acquisitions in recent years, including BEA Systems, Seibel and PeopleSoft.”

Click here for more coverage on this issue: Peter Thomas, The IT Nerd, Bloggingstocks.

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