Deals wrap: IBM shifting focus
IBM said it would buy data analytics company Netezza for $1.7 billion. The move comes as IBM is shifting its focus from increasingly commoditized computer hardware to higher-margin software and services, particularly analytics. *View article *View additional article on IBM from WSJ
Face-recognition software maker L-1 Identity Solutions is being sold to two of Europe’s top defense firms, Safran and BAE. The use of biometrics is spreading quickly due to growing security fears. However, privacy concerns have posed a barrier to their adoption in some markets. *View article
In the digital mapping and navigation sector, options for would-be buyers are rapidly narrowing, fueled by a growing appetite for location-based services, writes Harro ten Wolde and Tarmo Virki. *View article
Deals wrap: 3PAR bidding war hits $2 billion
What’s another $200 million between rival bidders? Less than three hours after Dell matched HP’s $1.8 billion bid for data storage specialist 3PAR, HP upped the ante to an even $2 billion. The HP offer shakes out to $30 per share. 3PAR shares were up another 20 percent to $31.29 in early trading, according to Reuters. *View article*
FT blogger Gwen Robinson wondered how 3PAR became the target of such an intense bidding war and suggested it may be “simply a throwback to those crazed acquisitive days of the dotcom boom.” *View article*
In another software play, HP is rumored to be a potential bidder for security software maker ArcSight Inc. According to the Wall Street Journal, bidders, including Oracle and HP, could pay up to $1.5 billion for the company. Other ArcSight competitors could include EMC, IBM and CA Inc. *View article*
This month’s $200 billion in takeover announcements is unlikely to assuage fears of a double-dip recession, analysts told Reuters. “For now, the dominant factor on the market remains the U.S. and Chinese slowdown in growth,” Alain Bokobza, head of global asset allocation at Societe Generale CIB in Paris, told Reuters. *View analysis*
Deals wrap: Vedanta makes bid for Cairn India
India-focused miner Vedanta Resources is reportedly close to buying a 51-percent stake in oil producer Cairn India for $8 billion to $8.5 billion, a source familiar with the matter told Reuters. While neither Cairn Energy nor Vedanta would comment, the source said the deal is expected to be announced on Monday.
Cairn India was boosted by a huge oil find in Rajasthan that turned the company into a major oil producer and, according to Reuters, the deal “would be the diversified miner’s (Vedanta) first move into oil and gas.” Read the Reuters factbox on Cairn India here.
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Google has been on a spending spree lately and folks are wondering who it will buy next? After paying $182 million for Facebook-app maker Slide earlier this month and reportedly making a buyout offer to Jambool, CEO Eric Schmidt recently told Bloomberg he has doubled the pace of acquisitions after some of Google’s internal projects failed.
PE Hub replayed a nice interview with David Lawee, Google’s VP of corporate development, on what the search giant looks for in acquiring companies.
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IBM announced it will buy software company Unica Corp for about $480 million in cash, reported Reuters. IBM will pay around $21 per Unica share, which sent Unica’s share price soaring 117 to as high as $20.78 in morning trading on the Nasdaq.
Playing in Larry’s sandbox
Having spent more than $42 billion to buy about 60 companies, Larry Ellison’s Oracle has set something of a daunting standard for merger activity in the business software industry. So while SAP’s plan to buy smaller business software maker Sybase for $5.8 billion may not roil markets, it could certainly shake up things in an already busy infotech sector.
With Sybase, SAP gets a boost in mobile technology, but will also end up with a big database business that provides steady revenues but little else on which SAP can grow its business.
The database chunk is by far the bigger earner for Sybase, with the mobile aps business accounting for only a little over a quarter of annual revenue, so it could make an attractive business for SAP to hive off. Breakingviews columnist Robert Cyran points out that keeping a hand in the database world could also prove awkward for SAP as it exacerbates competitive friction with its allies, Microsoft and IBM.
SAP could also look to sell the database business to cash up for any more strategic moves. Given this is the second-biggest deal for SAP in its nearly 40-year history, and marks the first big move since a management shakeup, the sandbox that so recently seemed to be Larry’s exclusive territory is only going to become more crowded.
What next for Dell?
Not content with buying Perot Systems last autumn for US$3.9bn followed shortly thereafter with the purchase of Kace Networks, Dell has a potential US$11bn war-chest to make further acquisitions.
“You will see acquisitions from us,” Dell’s Steve Felice told Reuters’ journalist Christoph Steitz on Tuesday. Felice is president of the company’s consumer, small and medium business, which makes up almost half of all Dell’s sales.
“[These acquisitions will] be pointed towards the strategy that we have as a company; and one of those key strategies is increasing the solutions, so that we can be the best-value solution provider to customers,” he added.
While Dell may be targeting the security and systems management space as a top priority to beef up its services business geared toward sectors such as government and healthcare, Felice’s comments bring up once again the whole mooted idea of Dell buying PDA maker, Palm.
Indeed, US$11bn worth of cash is a lot of money to play around with, particularly for SVP and M&A guru Dave Johnson, whom Dell controversially poached from IBM last year after he had spent 27 years at Big Blue.
Johnson’s title is not officially head of M&A at Dell, but he nevertheless advises chief executive Michael Dell on both the short-term and long-term strategy of the business. Apparently, however, Johnson had not been involved in the Perot talks – something which had been ongoing since 2007 – the same year that speculation first surfaced of Dell acquiring Palm.
Indeed, Dell is under pressure in the PC space from other vendors including its fiercest rival HP. Scaling up to compete and bad retail deals have caused margin pressure for Dell, according to some analysts. Other risks for the business include a slowdown in the sale of its servers. That points to why Dell has pursued the Perot deal, but integration issues still remain.
Tech looks for security blanket
As tech spending stages a comeback, watch for industry giants like Hewlett-Packard and IBM to start scouring the security software market for acquisitions that will boost their share of corporate IT budgets, Anupreeta Das reports. Security software is a critical component of the “stack” of applications used by companies to store and manage networks and data, making software makers from McAfee to upstart Sourcefire attractive targets.
“There is a clear trend toward convergence of technologies in the data center, and security is front and center,” said Daniel Ives, an analyst at FBR Capital Markets. He and other analysts said security spending by companies held up well during the recession even as overall IT budgets shrank — a mark of resilience that only adds to the lure of security companies. “Security really has the attention of CIOs (chief information officers),” Ives said in an interview. Read more, click here.
Will Brocade find a buyer now?
One theory is doing the rounds about why the Brocade-shopping-itself story found its way into the press when it did. People familiar with the matter have told Reuters that Brocade has been up for sale for weeks; one person said Brocade began sending out feelers to potential acquirers nearly two months ago.
Hewlett-Packard is said to have looked at Brocade, as did Oracle. One source said on Monday that HP went as far as to begin due diligence. But from what I hear, no one has found Brocade compelling enough to shell out a few billion dollars on the spot. If anything, HP could be interested in some of the assets of Brocade rather than the whole company, which could be why it stopped short of making an offer.
Other potential acquirers include IBM and Juniper, which is the No. 2 network equipment maker after Cisco, but bankers and analysts think neither company is likely to step in. From what I understand, IBM has not looked at Brocade, although that could change any minute.
Given this picture, you’ve got to wonder if Brocade and/or Qatalyst Partners, the firm reportedly hired by the networking and data storage company to shop it, strategically leaked the news after failing to find a buyer. Companies and their advisers are known to use the media to float trial balloons, put pressure on potential acquirers to step up and make a bid, test investor appetite for acquisition ideas and even drive up the acquisition price.
One banker called it the “European” style of M&A, where “people constantly create and leak rumors to build the perception of action.”
Rumor or not, the market clearly wants a sale, going by the 19 percent jump in Brocade’s stock on Monday. A Qatalyst spokeswoman declined to confirm that Frank Quattrone‘s firm has been hired.
As for who might buy Brocade? We’re all working overtime to find out.
from MediaFile:
Who runs mergers and acquisitions at Dell?
(Update: Dell PR misspoke about Johnson's responsibilities, and we've made changes below as indicated.)
Dell, which announced plans to buy Perot Systems for $3.9 billion on Monday, completed the deal without help from an executive in charge of mergers and acquisitions.
It's a touchy subject for Dell, which earlier this year named David Johnson to its executive team, poaching him from IBM where he served as head of M&A. IBM filed a lawsuit, saying that Johnson violated a non-compete agreement by taking the job with Dell. But IBM failed to persuade a judge to bar Johnson from working at Dell while the litigation is pending.
CEO Michael Dell told reporters on a conference call that Johnson was not involved in the Perot transaction "in any way," noting that the two companies had held discussions back in 2007, while Johnson was still at IBM. "It was not a new idea," Dell said. But the discussions heated up again over the summer, after Johnson joined Dell.
Reuters asked Dell spokesman David Frink how Dell could negotiate a $3.9 billion deal, its biggest ever, without involvement from Johnson, its head of M&A. He said that Michael Dell and Chief Financial Officer Brian Gladden had led a group of other executives who worked on the deal.
He added: "We don't have a head of M&A."
When asked what Johnson does for Dell, Frink said: "We don't spending a lot of time talking about what he is focused on"
Dell hunts for a banker
Dell is looking to hire an M&A chief, The Wall Street Journal reports, adding that the computer maker has been interviewing “investment banking and technology industry veterans” for the newly created executive position, and could announce a hire within the next month.
Two bankers have told me in the past few weeks this is the case. One Silicon Valley banker said Dell has been trying to fill the position for quite a while, but no M&A banker worth his or her salt wants to join the company, which is notorious for lagging behind on acquisitions, even as rivals like Cisco, Hewlett-Packard and IBM go forth and acquire every few months.
“Joining Dell is basically as good as saying goodbye to your M&A career,” said a banker who has received feelers from the Round Rock, Texas-based company.
Dell’s acquisition track record is pretty weak compared to its peers. Its biggest deal in recent memory is the $1.4 billion purchase of storage company EqualLogic in 2007.
When Cisco made its foray into the computer server market a couple of months ago, there was a lot of talk what companies might come into play, as biggies like HP and IBM rush to protect their turf. Some folks even read IBM’s pursuit of Sun Microsystems as a defensive response to Cisco’s announcement.
But on the Dell question, people wondered where the company fit in this dealmaking game.
“You can’t be half in on this,” Highland Capital Partners’ Peter Bell said at the time of Dell’s acquisition strategy. “You’ve got to be all in.”
If Dell doesn’t act fast they might find a banker very soon, not their own, but the one employed by HP, Lenovo or some other big fish IT player. Either you eat from the buffet or you become someone else’s tasty IT snack.
Everyone wants to soak up some Sun
The Wall Street Journal’s Deal Journal blog wrote a post yesterday about how Sun Microsystems, which has agreed to be acquired by Oracle, now looks “less dumb” than before. In the days after IBM walked away from the negotiating table about two weeks ago, the media was rife with comparisons between Sun and Yahoo, which bungled up a $47.5 billion buyout offer from Microsoft last year.
But now we all know why Sun was driving such a hard bargain with IBM, as Deal Journal says. It actually had some negotiating leverage because Oracle was already waiting in the wings.
Sources told me yesterday that Oracle began courting Sun way back in end-February/beginning-March. Initially, the business enterprise software maker sent feelers to Sun about buying just its software business. After all, Sun’s Java programming language and Solaris operating system work very closely with Oracle products.
But Sun, which at the time was also entertaining interest from Hewlett-Packard and IBM, told Oracle it wasn’t quite into selling off the company in chunks, the sources said. Soon after, Sun and IBM entered three-and-a-half weeks of exclusive talks with IBM, even as Oracle let it be known to Sun’s board that it continued to remain interested, the people added.
“Oracle made its interest known,” said one person familiar with the matter. “They were very aggressive in approaching Sun.”
So when IBM refused to meet Sun’s demands for deal assurances — and those were necessary, Sun felt, given the extent of overlap between the two compaies’ businesses and the antitrust scrutiny any potential combination would invite — the Java maker didn’t capitulate and run back to Big Blue.
Instead, the board divvied up into two groups; while one half kept an informal channel open with IBM, the other half called Oracle up, the source said. Then things just started to happen, and Oracle, realized it wouldn’t have to bid against IBM but could get all of Sun for $9.50 a share, or $7.4 billion.
