Inorganic Growth

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.

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.

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.

Contact: Scott Denne

Inphi picks up most of Cortina Systems for $126m in order to boost its profit margins. The purchase adds revenue but brings few opportunities for additional growth. Both companies make optical components for carrier networking devices and though there is little overlap in their product offerings (Inphi tends to target higher-speed applications), there is significant overlap in customers and little room for cross-selling.

What Cortina does have, says Inphi, is a stable business with gross margins in the high-60% range and $20m in quarterly revenue, compared with Inphi’s $33.9m in revenue last quarter and gross margins that are typically a few percentage points above 60%.

The deal brings Cortina’s investors, many of whom have been backing the company since 2001, close to an exit (Inphi isn’t buying the target’s digital home networking assets, which make up 15% of its business). Nearly all of Cortina’s growth came in 2006, when venture capitalists pumped $134m into the company to fund the acquisition of Intel’s networking components division. Cortina came close to an exit five years later when it filed for an IPO, but that never got out the door. The company logged less than $100m in revenue last year, compared with sales that hovered at about $140m annually in the first four years following the Intel deal.

Inphi doesn’t expect to return Cortina to growth. It anticipates that the target’s revenue will hold steady for the next four years as its carrier business tapers off and sales of datacenter networking components expand.

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