Author: Brenon Daly

Oracle sets its sights on networking, reaches for Acme Packet

Brenon Daly

Contact: Brenon Daly

After consolidating huge swaths of the software landscape, Oracle has turned its attention to networking with a landmark acquisition. The company will hand over about $2bn in cash for Acme Packet, which Oracle hopes will allow it to capture more business with service providers and enterprises as networks look to deal with higher-level traffic like voice and video in which Acme specializes. Acme – which gets about three-quarters of its revenue from product sales and the remaining one-quarter from maintenance and support – counts about 1,900 service providers and enterprises as customers.

However, Acme has run into difficulties recently. Sales dropped almost 10% through the first three quarters of 2012, and the company has found itself running in the red after years of profitable operations. Before Oracle’s bid, Acme shares had dropped more than 20% over the previous year, underperforming nearly all of the company’s beaten-down networking rivals. Even reflecting the premium, Oracle is acquiring Acme at just half the level that Acme commanded on its own as recently as mid-2011.

Not that Acme is ending its six-and-half-year run as a public company on the cheap. Oracle will hand over $29.25 for each share of Acme, or an enterprise value of $1.7bn. That works out to 5.9x Acme’s trailing sales, which is roughly inline with most of Oracle’s other big-ticket purchases. However, we would note that the 5.9x valuation is more than twice the median valuation for the 50 largest transactions over the previous year, according to The 451 M&A KnowledgeBase.

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On its way to (eventual) IPO, Alfresco does its first bit of M&A

Brenon Daly

Contact: Brenon Daly

In its first-ever acquisition, Alfresco Software has reached for an existing partner, WeWebU Software. The purchase of the 13-year-old German startup adds more management capabilities – specifically, a roles-based, configuration application framework – on top of Alfresco’s core ECM platform. In addition to customization, WeWebU should also enhance the mobile offering at Alfresco with its iOS-focused MobileWorkdesk front end.

The purchase comes as the open source company transitions from a founder-led, relatively low-profile business to one that’s eyeing the public market, at least down the road. As part of that change, just two weeks ago Alfresco appointed Doug Dennerline to the top job at the company.

A SaaS-veteran, Dennerline joins Alfresco as it finds itself competing on a new front. In addition to established ECM rivals such as EMC (Documentum), OpenText and, of course, Microsoft’s SharePoint, Alfresco is increasingly bumping into newer cloud-based startups, notably Dropbox and Box.

To combat that, Alfresco has shored up its platform with increased security and compliance to appeal to IT departments, as well as added a cloud offering of its own. Additionally, it has stressed that ECM is part of a larger business process – a function that should be made easier now with the addition of WeWebU’s configuration technology.

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Violin does a bit of portfolio roundout ahead of expected IPO

Brenon Daly

Contact: Simon Robinson, Brenon Daly

Violin Memory has made a technology-and-talent play, adding GridIron Systems in what’s likely to be the last bit of portfolio roundout before the flash-based storage specialist goes public. The purchase of GridIron is part of Violin’s strategy to maximize its addressable market in the emerging solid-state storage space, and specifically allows it to accelerate the performance of applications residing on existing SAN storage systems at large enterprises and service providers.

Violin didn’t disclose how much it paid for GridIron but we have heard from market sources that it wasn’t much money. As we understand it, GridIron was heading toward a wind-down and Violin is merely picking up some key IP and personnel from the company. The target’s website has only a skeletal list of executives, without a CEO or CFO. A year ago, GridIron indicated that it had some 50 employees, but Violin is expected to take on less than half that number. We’ll have a full report on the transaction in our next Daily 451.

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DoJ raises its voice against Bazaarvoice deal

Brenon Daly

Contact: Brenon Daly

In a highly unusual move, the US Department of Justice (DoJ) filed a lawsuit Thursday afternoon against a company that has already closed an acquisition of a rival firm, alleging the deal is anticompetitive. The DoJ says Bazaarvoice did not report its $152m cash-and-stock purchase of fellow online customer review site PowerReviews to either the DoJ or Federal Trade Commission. The transaction was announced May 24 and closed quickly thereafter, on June 12.

The DoJ, which began investigating after the deal had already closed, didn’t specify exactly what part of the acquisition it would seek to unwind. The release said only that the lawsuit ‘seeks to restore competition’ in the marketplace, and DoJ representatives didn’t respond to requests for clarification.

For its part, Bazaarvoice said it spent six months explaining that there would be ‘robust and ample’ competition in the social commerce marketplace following the Bazaarvoice-PowerReviews combination. The company plans to fight the lawsuit and indicated it expects to be ‘fully vindicated.’

As we noted at the time of the acquisition – which was Bazaarvoice’s first purchase, coming just three months after its IPO – the deal represented a significant bet on being able to move down-market, expanding Bazaarvoice’s voice-of-customer platform to SMBs. At the time of the announcement, PowerReviews had more customers (1,100) than Bazaarvoice (737), but only slightly more than one-tenth the revenue.

Whatever the outcome, Wall Street’s reaction to the lawsuit was immediate. Bazaarvoice shares were unchanged at about $9 each for virtually the entire session Thursday. But when the DoJ announcement came out in the final hour of trading, the stock plummeted 15% to about $7.50. The selling pressure continued on Friday, with the stock dipping to $6.65 – the lowest level for the shares since their debut last February. All in, the DoJ’s lawsuit has trimmed $165m from Bazaarvoice’s market value.

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NetSuite shops for its retail platform

Brenon Daly

Contact: Brenon Daly

One year after Retail Anywhere released its point-of-sales SuiteApp for NetSuite, the startup has been rolled into the on-demand ERP giant. Terms of the deal, which is NetSuite’s first since mid-2009, weren’t released. However, we suspect the price is probably in the $20-30m range of NetSuite’s two previous acquisitions.

Entirely bootstrapped through its 18 years of incorporation, Retail Anywhere has about 30 employees, with CEO Branden Jenkins taking a general manager role at NetSuite. According to our understanding, Retail Anywhere was generating roughly $5m of sales. For its part, NetSuite will likely report more than $300m of revenue for 2012 when it releases its financial results in early February. The market currently values NetSuite at a stratospheric $5bn.

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A deal-maker departs Dell

Brenon Daly

Contact: Brenon Daly

The top dealmaker at Dell, David Johnson, has left the computer maker for buyout shop Blackstone Group. Johnson joined Dell in mid-2009 as SVP for Corporate Strategy after an acrimonious split from IBM, where he had worked for 27 years. In mid-2010, Johnson was also named head of Business Development, overseeing acquisitions and investments at the company that has been trying to expand beyond simply being a ‘box seller.’

Johnson’s arrival at Dell came at a time when the company, which was a late-comer to the tech market consolidation, had just started shopping. In his time at the Round Rock, Texas-based giant, Dell announced some 20 transactions with a tab of $10bn. The acquisitions got Dell into virtually every part of the tech landscape, including IT services (Perot Systems), security (SecureWorks, SonicWALL), networking (Force10 Networks), storage (Compellent, AppAssure) and infrastructure software (Quest Software).

However, the return on that spending has yet to show up. Dell is still shrinking. It will likely end fiscal 2013, which wraps at the end of this month, with sales of about $57bn. That’s some $5bn, or 8%, lower than the company’s revenue in its previous fiscal year. Again, that decline comes despite a not-insignificant addition of aggregate revenue from its M&A spree. (For instance, Quest, which Dell closed in late September, was generating almost $900m in annual sales when it was acquired.)

The lack of growth at Dell is the reason the stock is out of favor on Wall Street. Since mid-2009, when Johnson joined Dell, the company has lost almost 20% of its value while the Nasdaq has tacked on 75%. The market values Dell at slightly less than $20bn.

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Imation continues storage push with Nexsan acquisition

Brenon Daly

by Simon Robinson

Imation, a company perhaps best known for selling consumer CDs and DVDs, has announced that it has acquired 14-year-old storage systems specialist Nexsan for $120m in cash and stock. Though Nexsan has been seeking a buyer for some time, the company has a good-sized and well-established business serving SMBs and enterprises. Imation, which says the purchase is part of its own strategic transformation that has seen it focus on storage and security, plans to use the move as a platform to begin targeting this audience more directly with Nexsan’s range of purpose-built storage systems and appliances.

Under terms, Imation is handing over $105m in cash and $15m in stock. We understand that Nexsan generated revenue of about $90m in 2012, meaning Imation is paying roughly 1.3 times trailing sales. The acquisition of Nexsan is the largest purchase Imation has done in a half-decade and substantially thins its treasury. At the end of September, Imation, which is burning cash, had $186m in cash and equivalents. Click here to see our full report.

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A bit of shopping of our own

Brenon Daly

Contact: Brenon Daly

The 451 Group did a bit of holiday shopping of our own over the recent break. We’re excited to announce that we just closed our acquisition of Yankee Group, a move that significantly enhances our coverage of the mobile communications market. Terms of the deal weren’t released.

Founded in 1970, Yankee Group was the first independent IT research and advisory firm focused on the communications industry. It has built on that original focus, establishing itself as one of the largest research firms covering the highly disruptive mobile market. Yankee Group will operate as an independent, stand-alone division of The 451 Group.

The purchase of Yankee Group continues our efforts to expand our portfolio by acquiring IT insight and research firms. In 2011, we added survey firms ChangeWave Research and TheInfoPro, while in 2009 we picked up datacenter consultancy Uptime Institute and in mid-2005 we bought Tier 1 Research, which focuses on the hosting and collocation markets.

For more real-time information on tech M&A, follow us on Twitter @MAKnowledgebase.

Tech M&A recovery stalls in 2012

Brenon Daly

Contact: Brenon Daly

After two straight years of post-recession increases in tech M&A spending, the value of transactions announced in 2012 slipped lower. For the just-completed year, we tallied deals valued at roughly $177bn across the globe. That’s a 21% drop from 2011 and slightly below the level of 2010.

M&A activity last year was undermined by a heightened level of economic and political uncertainty. In Europe, the lingering debt crisis flared to a point where in mid-2012, the 17-nation Eurozone appeared to be fraying beyond repair. Meanwhile, in the US, dark clouds of uncertainty rolled out of Washington DC due to the outcome of national elections and, more importantly, the unresolved ‘fiscal cliff.’ Overhanging all of this is the fact that the global economy slowed in 2012, and is likely to further slow in 2013.

Still, against that difficult backdrop, there were a few notable transactions in 2012. SoftBank’s $20bn purchase of a majority stake of Sprint stands as the largest tech/telco deal in a half-decade. Cisco’s $5bn acquisition of set-top box software vendor NDS Group last March is the serial acquirer’s second-largest transaction ever. Meantime, big-ticket SaaS acquisitions continued to gain pace, with Ariba, Taleo, Eloqua and Kenexa all taken out last year in deals valued, collectively, at $8.8bn.

Global tech M&A

Year Deal volume Deal value
2012 3,539 $177bn
2011 3,759 $225bn
2010 3,270 $188bn
2009 3,030 $143bn

Source: The 451 M&A KnowledgeBase

The top tech deal of 2012: VMware-Nicira

Brenon Daly

Contact: Brenon Daly

With 2012 winding down, it’s time to look back over the year to see what stood out in what’s shaping up to be a tough year for tech M&A. As we always do in our annual survey, we asked corporate development executives to cast their vote for the most significant transaction of the year. For 2012, they overwhelmingly tapped VMware’s acquisition of Nicira as the Tech Deal of the Year.

Certainly, the $1.3bn transaction had a number of intriguing aspects. It’s a big price – $1.3bn is about the same amount that VMware has spent on its entire M&A program since being partially spun off from EMC. And it’s a bold move, even at the cost of picking a fight with longtime friend and networking ally Cisco Systems. But if VMware can have even part of the success in virtualizing networking with Nicira that it has already had by virtualizing computing, the acquisition will pay for itself many times over.

All of those elements figured into the corporate dealmakers handing the Golden Tombstone for 2012 to VMware. And, we should note that after two consecutive years of tight races, the voting in 2012 wasn’t even close. Twice as many survey respondents picked VMware-Nicira ahead of this year’s second-place transaction, Facebook’s reach for Instagram.

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