Category: technology stocks

CWC sells stake in Macau unit

Contact: Tejas Venkatesh

Cable & Wireless Communications (CWC) has announced the sale of its 51% stake in Companhia de Telecomunicações de Macau (CTM) to Chinese state-owned company CITIC for $750m in cash. The move is part of the telecom service provider’s continued restructuring and efforts to focus solely on the Americas, and comes one month after it offloaded its Monaco & Islands division.

CTM generated EBITDA of $165m (on $524m in sales) for the year ended March 31, 2012, giving the company an EV/EBITDA valuation of 8.9. Last month, BATELCO bought the Monaco & Islands division of CWC for $680m, or 6.3x trailing EBITDA. CWC’s restructuring has been underway ever since it spun off from its former parent company Cable & Wireless. That spinoff also created Cable & Wireless Worldwide, which was sold to Vodafone in April 2012 for $1.7bn, or 2.7x trailing EBITDA.

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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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Is DISH desperate for spectrum?

Ben Kolada

Contact: Ben Kolada

Eager to enter the cellular market, DISH Network has announced that it is interested in acquiring Clearwire for $3.30 per share, or about $4.8bn. The deal is actually a ‘take two’ for DISH, and shows the company’s desire (desperation?) to enter the wireless market. However, the market for wireless spectrum is so tight that those with such assets aren’t likely to sell them.

With mobile bandwidth consumption exploding, wireless spectrum is among the most coveted assets by wireless carriers. Over the past two years, there have been a handful of high-priced spectrum acquisitions announced by AT&T, Verizon, T-Mobile and Sprint. The DISH proposal values Clearwire’s spectrum at $2.2bn.

DISH’s desperation to enter the wireless market is apparent in the fact that it previously tried to acquire some of Clearwire’s spectrum assets before Sprint announced that it would buy the remainder of Clearwire it didn’t already own. Obviously, the DISH-Clearwire deal never came to fruition, and the new transaction is likely to fail as well for the same reason.

This time around, spectrum is again at the top of the list of concerns. In responding to the offer, Clearwire issued a press release summarizing a list of Sprint’s objections. First and foremost, Sprint argues that its pending agreement with Clearwire prohibits the company from selling spectrum assets without Sprint’s consent.

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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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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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Oracle pays up for an ‘Eloquent’ marketing platform

Brenon Daly

Contact: Brenon Daly

Two months ago, we noted that Oracle was rumored to be looking to acquire a marketing automation vendor. At that point, the buzz was that the acquisitive software giant, which has done social media-flavored marketing deals recently, was eyeing Marketo to be its platform. Instead, Oracle went with Eloqua, paying $956m for the company (on a fully diluted equity basis).

Eloqua, which went public in August but recently shelved a subsequent follow-on offering, had about $85m in cash, giving the proposed transaction an enterprise value of $871m. Using that figure, Oracle is valuing Eloqua at about 9.7x trailing sales – a valuation that’s about 50% higher than it paid in either of its acquisitions of fellow publicly traded SaaS application vendors over the past 14 months. (Both RightNow and Taleo went off at closer to 6.5x trailing sales.)

For Eloqua, the deal wraps a short – but rather profitable – stint on the public market. It only went public four months ago, but it is leaving the Nasdaq at twice the price it joined. Eloqua first sold shares to the public at $11.50, while Oracle is paying $23.50 for each share in the acquisition. The transaction is expected to close before mid-2013.

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A bearish outlook for tech IPOs in 2013

Brenon Daly

Contacts: Brenon Daly

In our just-published report on our annual survey of corporate development executives, the shoppers told us they don’t expect to have to outbid the public market when they consider acquisition targets. Almost half (47%) said they anticipate the IPO market to offer ‘less competition’ in 2013, which is three times higher than the 15% that predicted ‘more competition.’ (For comparison, last year one-third of responses (33%) forecasted more competition from IPOs, while one-quarter (26%) indicated less competition.)

The chilly outlook for offerings underscores just how difficult the IPO market has become. In the back half of 2012, there have been only about a half-dozen tech offerings. Although there have been some eye-popping market caps created (for instance, Workday, which came public in mid-October, now trades at $8.5bn), there just haven’t been enough to see a real threat of ‘dual tracking,’ according to corporate buyers.

If anything, the IPO market will be even quieter in 2013. The median forecast from our corporate development executives called for just 20 offerings, down from about 25 offerings in each of the two previous surveys. Click here to see our full report on the outlook for tech IPOs and M&A in 2013 from a key market participant: corporate development executives.

Projected number of tech IPOs in coming year

Period Median response
December 2012 for 2013 20
December 2011 for 2012 25
December 2010 for 2011 25
December 2009 for 2010 15
December 2008 for 2009 5

Source: 451 Research Tech Corporate Development Outlook Survey

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