Ripe time for spoiled fruit

Contact: Ben Kolada

While we’re in a season of slim pickings for tech M&A, one market that’s ripening is the sale of spoiled fruit. Major tech companies such as Microsoft and VMware are now selling flagging businesses at an unusually quick clip.

There are a variety of reasons why companies would sell assets during every part of the economic cycle. But right now, as growth slows across much of the established tech markets, companies are increasingly focusing on the relatively few areas that are recording sales increases. (To continue our gardening metaphor, it’s similar to a person cutting off a dying bulb so that the rest of a plant can flourish.)

Microsoft, for example, announced its second asset sale in as many months, selling its Mediaroom IPTV distribution platform to Ericsson. (Last month, Microsoft sold its Atlas Advertiser Suite assets to Facebook.) Mediaroom was part of Microsoft’s Entertainment and Devices Division (EDD), which includes Xbox, Skype and Windows Phone assets. EDD revenue rose in FY 2012 primarily due to Skype and Windows Phone revenue, but has declined 8% in the two quarters since as Xbox sales sank.

And in the case of VMware, the sizzling growth of its core virtualization software in previous years allowed it to expand into new markets. But as the company’s top-line expansion dipped to 22% in 2012 from 32% in 2011, it announced a refocus of its business. VMware sold its SlideRocket assets in March, and may consider selling other noncore businesses.

Select asset sales in 2013

Date announced Target – asset Acquirer Deal value
April 8 Microsoft – Mediaroom assets Ericsson Not disclosed
April 3 Google – 3LM BoxTone Not disclosed
April 1 IBM – ShowCase software division Help/Systems Not disclosed
March 14 TeleNav – enterprise mobile business FleetCor Technologies $10m
March 5 VMware – SlideRocket business ClearSlide Not disclosed
February 25 HP – webOS assets LG Electronics Not disclosed
February 19 Oracle – Lustre assets Xyratex Not disclosed
February 5 United Business Media – data services businesses Electra Partners $251m
February 4 News Corp – IGN Entertainment j2 Global/Ziff Davis $50m
January 28 Sierra Wireless – AirCard business NETGEAR $138m
January 24 WebTech Wireless – NextBus business Cubic $20.9m

Source: The 451 M&A KnowledgeBase


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