Category: M&A

As HP looks to set back into M&A market, who’s on its short-list?

Brenon Daly

Contact: Brenon Daly

Now that Hewlett-Packard is once again growing organically, we’re hearing that the tech giant is looking to grow inorganically once again, too. Several market sources have indicated in recent days that HP has pursued a large network platform play, as well as a smaller round-out for its application security portfolio.

Before we look at the specifics of each rumor, it’s worth noting the fact that any acquisition would be a dramatic reversal from the company’s recent stance. Since its disastrous purchase of Autonomy in mid-2011, HP has stepped almost entirely out of the M&A market, announcing just a pair of small transactions. For comparison, IBM has inked more than 30 deals in the same three-year period, according to The 451 M&A KnowledgeBase.

So who is HP supposedly eyeing? Well, both Blue Coat Systems and WhiteHat Security would bring a dash of color to the company.

Of the two rumored deals, we think the larger one – Blue Coat – is less likely, if just because a more measured return to dealmaking after a three-year hiatus would probably play better among investors, who have bid HP shares up to a three-year high. Blue Coat, with its diverse networking and security product portfolio and headcount of more than 1,400, would also pose a number of integration challenges to a company that is still working through the last big transaction it did. Furthermore, it would likely cost HP more than $2bn.

More reasonably, WhiteHat would likely cost HP only about one-tenth that amount and would be a relatively low-risk expansion to the company’s existing portfolio by bolstering its security services. HP already offers application security, a portfolio built primarily via M&A. HP acquired Web app testing startup SPI Dynamics in June 2007, and then added Fortify Software in August 2010. Fortify, which had a relatively strong partnership with WhiteHat before its sale, stands as one of the few recent deals that HP has done that has actually generated the hoped-for returns.

Murata nearly brings Peregrine parity with IPO price

Scott Denne

Contact: Scott Denne

Murata Manufacturing’s $465m acquisition of Peregrine Semiconductor marks a tranquil end to the target’s two years as a public company. Peregrine went public at $14 per share two years ago this month and has agreed to sell to Murata for $12.50 per share. Though the price is a loss for its initial shareholders, it could have been far worse and the 76% premium from Peregrine’s price 30 days ago helps soften the blow.

Peregrine came through 2012 with a gain for shareholders, then a key OEM (rumored to be Apple) diversified its radio frequency component supply chain, sending the company’s stock down and contributing to stagnated revenue since the start of 2013. Peregrine is not the only semiconductor vendor that’s been hurt by an overreliance on one of the two major smartphone OEMs (Samsung and Apple). Earlier this year, Cirrus Logic snagged Wolfson Microelectronics in a $488m deal aimed at spreading out the customer base for its audio chips, and Audience, a Cirrus competitor, picked up Sensor Platforms for $41m to try to push its products beyond the smartphone market.

According to The 451 M&A KnowledgeBase, the premium for Peregrine’s stock is the highest for any chipmaker in the past 12 months, but Peregrine shareholders aren’t the only ones to get bailed out of a poor-performing semiconductor stock with a hefty premium. Avago Technologies’ $6.6bn purchase of LSI at 36% brought that company’s stock up to levels it hadn’t seen since 2006, and the 75% premium that M/A-COM Technology handed to Mindspeed Technologies shareholders helped level off a 36% drop in the target’s stock in 2013.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

VMware thinking long and short in CloudVolumes pickup

Scott Denne

Contact: John Abbott

With just 25 employees, CloudVolumes is a relatively small purchase for VMware, but one with big implications. By grabbing CloudVolumes, the virtualization vendor seeks an immediate boost to its desktop virtualization efforts and help in fending off a long-term threat from Docker.

The first version of its VMware View desktop virtualization software (a successor to VMware VDM) was introduced in 2008, but has taken longer than expected to gain momentum. VMware has made a handful of tuck-in acquisitions to bolster its desktop virtualization capabilities, including Desktone, Wanova and RTO Software. CloudVolumes provides a more efficient, cost-effective and easier to manage means of providing users with persistent virtual desktops.

While VMware is clearly keen to keep one step ahead of its direct competition, one of the biggest motivations behind this particular purchase may have been the huge rise of interest in Docker, the open source engine that automates the deployment of applications in lightweight, portable containers. Adding CloudVolumes, which virtualizes everything above the operating system (not just apps but also data, settings, libraries and user profiles), gets VMware similar capabilities.

We’ll have a more detailed look at this acquisition in tomorrow’s 451 Market Insight.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

Mad Mimi lands in GoDaddy’s inbox

Scott Denne

Contact: Scott Denne

GoDaddy swaps out its email marketing software as it heads toward a public offering. The Web hosting giant had an acquisitive streak last year, printing seven deals, but today’s purchase of Mad Mimi is only its second of 2014. That the transaction comes amid a relative M&A drought and replaces an existing product highlights the importance that GoDaddy places on email marketing capabilities – and rightly so.

Though there’s plenty of buzz around social and other corners of the marketing software business, email dominates digital marketing. According to a survey by ChangeWave Research, a service of 451 Research, 76% of respondents use or plan to use email marketing, 25 percentage points higher than any other category of marketing software. And while 41% plan to increase spending on digital marketing, only 2% expect to cut back.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

Google nabs Jetpac to defend mobile turf

Scott Denne

Contact:  Scott Denne

Google’s momentum in desktop advertising made it the dominant player in mobile. Now, facing encroachment from players like Yahoo and Facebook, the search giant is making acquisitions to add mobile capabilities. Google’s latest target is Jetpac, a three-year-old startup that built a recommendation app powered by contextual analysis of pictures across Instagram. The technology will be used to enhance the company’s mobile search and Google Now.

In the past year, Google has acquired about eight companies to bolster its mobile services. These include Emu, a mobile messaging platform that uses artificial intelligence to provide relevant information and recommendations based on the user’s location and interests, and Songza Media, a music streaming and playlist curation app.

Google’s competition hasn’t been idle in this time. Twitter has picked up companies like Namo Media and TapCommerce to improve its mobile ad products, while Yahoo bought Flurry to help scale its mobile ad efforts.

We’ll have a detailed report on Google’s Jetpac acquisition in tomorrow’s 451 Market Insight.

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Wayfair seeks value in public markets

Scott Denne

Contact: Scott Denne

Wayfair preps a public offering, setting itself up to be among the few e-commerce companies to obtain liquidity at an attractive price. Exits for online retail vendors have been tough to come by – there have been few recent IPOs, and the value and volume of acquisitions have declined.

The home décor retailer posted $1.11bn in trailing revenue, with a $59.6m loss, while growing about 50% year over year. Its financial profile is similar in sales and spending to Zulily, except the latter company has grown nearly twice as fast through the first half of 2014, and has slightly better margins and a bit lower operational costs that have tipped it into the black, while the red ink has grown on Wayfair’s income statement.

Wayfair’s slower growth will likely translate into an enterprise valuation that’s lower than the 4.5x trailing revenue Zulily posts. Even a multiple that’s half what Zulily fetches would be a strong bump from the roughly $1.8bn post-money valuation on Wayfair’s last round, and well above the 0.5x median multiple in acquisitions of e-commerce providers in the past 24 months, according to The 451 M&A KnowledgeBase.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

Hitachi’s late de-dupe deal

Scott Denne

Contact: Scott Denne Dave Simpson

Years later, Hitachi Data Systems follows the competition with a de-duplication acquisition of its own, buying longtime partner Sepaton. Prior to yesterday’s announcement, there hadn’t been a purchase of a de-dupe company in nearly four years.

Almost all of HDS’s hardware rivals – including EMC, IBM and HP – already have strong plays in the data-protection software space. For backup and recovery, HDS primarily relies on its reseller partnership with CommVault. We expect HDS to eventually integrate Sepaton’s technology with its HDIM software, which is the result of its purchase of data-protection vendor Cofio. In addition, we anticipate tight integration of Sepaton’s platforms with HDS’s primary storage systems and software.

Past de-dupe deals

Date announced Acquirer Target Deal value
August 14, 2014 Hitachi Data Systems Sepaton Not disclosed
December 20, 2011 Imation Nine Technology $2.5m
July 19, 2010 Dell Ocarina Networks Click for estimate
June 1, 2009 EMC Data Domain $2.35bn
April 18, 2008 IBM Diligent Technologies Click for estimate

Source: The 451 M&A KnowledgeBase

Subscriber’s to 451 Research’s Market Insight Service can click here for a detailed report on HDS’s acquisition of Sepaton.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

Avago unloads another bit of LSI

Scott Denne

Contact: Scott Denne John Abbott

Intel is bolstering its network processor offerings and system-on-a-chip capabilities through the acquisition of LSI’s Axxia networking business. Intel will pay $650m in cash for the unit, which Avago Technologies obtained via the recently closed purchase of LSI.

This is Avago’s second divestiture of a piece of its LSI portfolio – transactions that make its initial deal more compelling. Through this sale and an earlier unloading of LSI’s storage business, Avago has paid back $1.1bn of the $6.6bn it shelled out while only losing about one-tenth of the target’s $2.37bn in 2013 revenue.

The move by Intel adds to the growing portfolio of infrastructure silicon and software that the company has been assembling over the past few years. Intel exited the mobile application processor business in June 2006 via the sale of its ARM-based PXA line to Marvell for $600, and followed that deal by licensing its IXP network processor to startup Netronome. Then, in August 2010, Intel renewed its interest in the networking sector, buying Infineon Technologies’ wireless modem business for $1.4bn, followed a year later by the purchase of Fulcrum Microsystems and, in December, the pickup of MindSpeed Technologies’ wireless assets.

We’ll have a more in-depth report on Intel’s Axxia acquisition in tomorrow’s 451 Market Insight.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

Telstra nabs Ooyala as TV goes IP

Scott Denne

Contact: Scott Denne

Telstra reaches for Ooyala in a purchase that values the video company at $360m. The deal is the latest in a string of transactions aimed at profiting from the shift of video from broadcast to broadband. Seven-year-old Ooyala offers broadcasters and service providers the tools and services to distribute, manage and monetize video content.

Ooyala remained independent through an earlier wave of consolidation in this space at the end of the last decade when Comcast bought thePlatform for $90m, Cisco purchased ExtendMedia, and EchoStar paid $45m for Move Networks. Those deals were part of the first iteration of Web video – PC-based, short-form content, with little participation from major broadcasters.

Now that long-form television content is rapidly shifting to the Internet, it’s spurring another round of acquisitions from companies looking to build out their stack of video tools needed by traditional broadcasters, such as content protection and digital rights management. Earlier this year, Kaltura nabbed Tvinci to obtain those capabilities and Ericsson picked up Azuki Systems, following the purchase of Microsoft’s Mediaroom business. In June, Google bought mDialog with the aim of offering ad formats to appeal to broadcast companies – a rationale that mirrors Comcast’s reach for FreeWheel Media.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

IBM aims for IAM targets

Scott Denne

Contact: Scott Denne Garrett Bekker

IBM inks its second acquisition in a month to grow its identity and access management (IAM) capabilities. In reaching for Lighthouse Security Group, Big Blue gains a managed services offering that already runs on its IAM suite, as well as hard-to-find talent in the IAM sector.

Though Lighthouse brings some unique intellectual property, the rationale is different than last month’s purchase of CrossIdeas, which added access governance and analytics software to IBM’s already broad IAM portfolio, which is mostly built around assets from Tivoli.

The relative importance of IAM within the security landscape expands as the notion of a security perimeter retreats. As we noted in an earlier report, IAM has already played a role in a number of smaller deals this year, including Ping Identity’s pickup of accells technologies and HID Global’s takeout of Lumidigm, as well as Gemalto’s agreement to spend $890m on SafeNet last week.

Whether customers are seeking decreased complexity of IAM deployments via a service like Lighthouse or advanced capabilities like CrossIdeas, IAM is a top priority for CISOs. According to a 2013 survey by TheInfoPro, a service of 451 Research, identity management was the most common security-related priority for IT shops over the next 12 months.

We’ll have a more detailed look at this transaction in tomorrow’s 451 Market Insight.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.