SK Hynix plucks Violin’s PCIe biz

Scott Denne

Contact: Scott Denne

Violin Memory jumps out of the server-side storage business just a year after launching a PCIe flash product. The quick exit – a $23m sale of the division to SK Hynix – comes as Violin dedicates resources exclusively toward returning its storage systems business back to growth (minus the PCIe unit, sales fell 31% year over year to $17m in the most recent quarter).

Violin entered the flash PCIe fray just as serious competition emerged for all-flash storage systems, a dangerous time (as we pointed out in an earlier report ) for a small company with an early lead to divide its attention. Considering the market traction for server-side flash, it makes sense that Violin would jettison that business.

Violin got off to a respectable start in PCIe, hitting $5m in quarterly revenue by its third quarter of PCIe sales, but the market is littered with larger competitors and, as a whole, server-side flash products have attracted scant attention from enterprise buyers. According to surveys last year by TheInfoPro, a service of 451 Research, a full two-thirds of respondents said they had no plans to implement server-side flash. Only 18% of respondents had deployed the technology, up from 11% in the same survey a year earlier.

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Symantec scores TouchDown with NitroDesk acquisition

Scott Denne

Contact: Scott Denne Chris Hazelton

Three secure mobile email businesses have been acquired in the past two weeks –first Google bought Divide at a stunning multiple, then LANDesk purchased LetMobile, and now Symantec has reached for NitroDesk, the maker of TouchDown. While none of these deals will add much to the top line, they are an opportunity to add an important product to the acquirer’s mobile device management suites, while delivering a jab to the competition.

Providing secure email is becoming essential for enterprise mobility management (EMM) as usage begins to shift away from managing the device and toward managing applications as more employees use their personal mobile devices for work.

Despite that shift, few mobile management vendors have built their own secure email product, choosing instead to partner with companies like NitroDesk. Symantec, for example, had partnered with NitroDesk to fill this gap, as did several other providers that could now find themselves temporarily locked out of this corner of EMM.

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F5 buys small DDoS vendor Defense.net to bolster growing security business

Scott Denne

Contact: Scott Denne

F5 Networks fires another shot into the security market, buying anti-DDoS company Defense.net. The deal follows the application delivery vendor’s $91m acquisition of antifraud provider Versafe in September 2013.

As it did with Versafe (and most of its acquisitions), F5 is reaching for an early-stage company. Defense.net launched a first product last year and was just beginning to line up customers. Versafe, by comparison, was bought when it was just a $2m business, according to our understanding, and much of that from a partnership with F5.

Though F5 doesn’t break out its security sales in quarterly earnings reports, surveys by TheInfoPro, a service of 451 Research, support the company’s claim that security is a ‘major driver’ of its growth. Overall sales were up 20% year over year last quarter to $420m. In the most recent round of surveys, F5 made its first appearance in several network security categories, including unified threat management and network intrusion detection. Most notably, the company’s ranking in the application-aware firewall category rose to third place in our recent deployment survey, up from fifth a year earlier.

We’ll have a detailed report on this deal in our next 451 Market Insight.

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Microchip stamps its passport

Scott Denne

Contact: Scott Denne

Microchip Technology prints its first major international purchase, picking up Taiwan’s ISSC Technologies for $328.5m. Despite averaging two acquisitions per year since 2009 and getting about two-thirds of its revenue from Asia, this is its first M&A foray into the region.

The appeal of avoiding US taxes by putting its foreign cash to work is apparent in the multiple Microchip’s paying. The 4.3x trailing 12-month revenue makes ISSC the highest-valued company Microchip has bought. Not all of the multiple can be attributed to ISSC’s location – its revenue doubled to $69.2m last year, giving it an atypical growth rate for a Microchip target.

ISSC likely won’t be Microchip’s last major foreign acquisition (it previously bought a European vendor, EqcoLogic, for $9m). Microchip’s stock price is up more than 200% since embarking on its recent M&A tear in 2009 (before that year, it only inked four purchases). Also, about $2bn of its roughly $2.1bn in cash at the end of last quarter is still overseas.

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Cisco’s incident-response response

Scott Denne

Contact: Adrian Sanabria

In its $2.7bn acquisition of Sourcefire last year, Cisco obtained significant threat detection and prevention capabilities but still had difficulties showing customers the big picture and integrating into the incident-response process. Now it’s adding those capabilities by picking up ThreatGRID, an anti-malware analysis vendor and threat intelligence provider.

Cisco obtains a popular threat intelligence source, with its feeds already baked into at least a half-dozen popular SIEM and anti-malware products. The twist here is that Cisco’s Sourcefire division already has an anti-malware detection and analysis offering. Our take is that this is partially a complementary deal, much like how Bit9’s pickup of Carbon Black filled in many of the vendor’s coverage and functionality gaps. The move is also a competitive one, better positioning Cisco against other firms such as FireEye and Palo Alto Networks. Both have been diversifying their product portfolios through several acquisitions this year.

The purchase of ThreatGRID is all about context and getting the big picture. Most anti-malware offerings are focused on identifying and stopping malware, but don’t provide insight into what’s happening and why. Given the importance to CISOs to shrink the time from malware detection to recovery, improved visibility and incident response are becoming key ingredients of any broad security portfolio and we expect any company in the incident-response and next-generation anti-malware categories to be potential acquisition targets this year.

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Survey: Ma Bell won’t get ‘churned’ with DirecTV

Brenon Daly

Contact: Brenon Daly

AT&T’s planned $48.5bn purchase of DirecTV has one thing going for it that Comcast’s similarly sized acquisition of Time Warner Cable doesn’t: customers don’t necessarily hate the providers. That’s at least one way to handicap the outlook for the two proposed pairings, which total, collectively, about $94bn in transaction value. The two deals represent the second- and third-largest tech transactions since 2003.

In the end, the return on both of these mammoth bets by telcos will be determined by how well the new owners serve customers. On that count, AT&T – both by itself and with the addition of DirecTV – has much more goodwill among TV consumers that Comcast-Time Warner Cable, according to ChangeWave Research, a service of 451 Research. In a March survey of 4,375 North American residents, about one-quarter of respondents said they are ‘very satisfied’ with AT&T U-verse and DirecTV. That was more than twice the level that said they are very satisfied with Comcast (11%), and four times the level for last-placed Time Warner Cable (a paltry 6%).

Perhaps more importantly, the ChangeWave survey indicates that TV subscribers aren’t planning to stick with the service they don’t like. (We would note that for service providers, which rely on monthly billing subscription fees to offset huge capital expenditures, churn is particularly corrosive to business models.)

According to ChangeWave, one in eight respondents said they plan to switch from either Comcast or Time Warner Cable in the next half-year – half again as many who planned to jump from either AT&T U-verse or DirecTV. And where are the dissatisfied TV subscribers likely to look to get their fix of The Real Housewives of Orange County or SportsCenter ? Well, it just so happens that DirecTV and ATT U-verse are the most likely replacement service providers, according to ChangeWave.

CW TV switch

 

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GreenBytes picked up by Oracle after flying too close to Sun

Scott Denne

Contact: Scott Denne Simon Robinson

Scorched by Sun Microsystems, GreenBytes finds an unlikely savior in Oracle. The database giant has struck a deal to buy the VDI-focused storage vendor in a deal that we believe delivered a better return than its small customer base would suggest.

Shortly after going to market in 2008 with a NAS appliance built on the open source ZFS file system, GreenBytes was hit with a trademark and intellectual property lawsuit by Sun Microsystems. Though that suit was settled shortly before Sun sold to Oracle in early 2010, GreenBytes pivoted to selling a hybrid flash and disk appliance, but had trouble attracting new venture capital beyond an initial round from Battery Ventures in 2009. In 2012, GreenBytes pivoted again to a VDI-focused storage product and attracted $12m from cleantech investor Generation Investment Management and Battery. Evercore Partners advised GreenBytes on its sale.

As of November, GreenBytes had landed more than 100 customers for its VDI offerings, though it’s unlikely that attracted Oracle. More likely, Oracle was drawn to the company for its inline de-duplication technology built on top of ZFS, the file system that Oracle obtained as part of its acquisition of Sun. Oracle has limited interest in VDI, but GreenBytes’ de-dupe software should boost the performance and efficiency of its ZFS Storage and Exadata appliances.

We’ll have a more detailed report on this deal in our next 451 Market Insight.

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Acxiom takes onramp to online data with $310m acquisition of LiveRamp

Scott Denne

Contact: Scott Denne

Acxiom makes its boldest bid yet to push its marketing data business further into the digital world with the $310m acquisition of LiveRamp. The marketing data giant has talked up the opportunities to expand its existing assets and build out its offline data assets for the digital sphere, but spending has been tame compared with this deal.

In 2013, Acxiom tripled its R&D budget to $31.6m, still only one-tenth of what it’s paying for LiveRamp. That tripling was, in part, to build and launch AOS, its data management platform for digital marketing applications. That offering gains potency with LiveRamp’s technology and partnerships and will position it to compete with Neustar and Oracle, both of which recently bought their own data management platforms.

Not only is Acxiom spending about 75% of its cash on the deal, it’s paying a healthy multiple. Discussing the acquisition on its earnings call, Acxiom said it expected LiveRamp to have $25-30m in annual revenue by the end of two years from now, meaning it values LiveRamp beyond 10x projected revenue. To add shock to the sticker price, take note that Acxiom hasn’t purchased a technology company since 2008 (when it snagged Quinetix for $2.7m) and hasn’t spent more than $100m on a technology acquisition in almost a decade, according to The 451 M&A KnowledgeBase.

LiveRamp built technology that takes in a company’s CRM data and matches it to online devices. Acxiom has long trafficked in consumer data, both its own and that of customers. By owning LiveRamp, Acxiom enables marketers to retarget existing customers online, even if it only has an offline relationship with them. For example, car companies could target customers with Web videos, even if they have only been to the dealership, and not the website.

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Social measurement looks ripe for M&A

Scott Denne

Contact: Scott Denne Matt Mullen

The growing amount of funding, matched with the increasing quality and importance of social media measurement, could make that sector the next battleground for marketing software M&A. The past three months have seen companies like Socialbakers, Simply Measured and L2 raise venture rounds of $15-25m, and social media software vendor Lithium Technologies added to its marketing cred with the acquisition of social measurement firm Klout.

The abundance of untamed social media data, and the value of that data, is creating a vital need for better measurement – something that’s lacking in the first generation of social media marketing products, such as Google’s Wildfire. While those tools did little more than counting ‘likes’ and ‘retweets,’ the current generation of software enables marketers to dig deeper into the results of campaigns, with capabilities such as content optimization, visual analysis and competitive industry benchmarks.

It’s the need for not just better social measurement but better measurement across several marketing channels that has driven marketing and advertising software deals lately, including Google’s purchase of Adometry, Oracle’s pickup of BlueKai, and AOL’s $89m reach for Convertro.

We’ve taken a more in-depth look at this sector, including potential acquirers and targets. Subscribers to 451 Research’s Market Insight service can click here for that report.

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Vantiv nabs Mercury for $1.65bn

Scott Denne

Contact: Scott Denne Jordan McKee

Amid a slowdown in its growth, Vantiv picks up payment technology processor Mercury Payment Systems for $1.65bn in a bid to boost its integrated payment offerings. This is Vantiv’s second acquisition of an integrated payments company in less than a year, a reflection of the importance of this emerging corner of the point-of-sale (POS) market.

Founded just over a decade ago, Mercury sells integrated payment-processing services that are built to connect with other business software, such as CRM or accounting systems. As more software becomes available to SMBs, more of them are exchanging isolated payment systems (where Vantiv’s roots lie) for integrated payments. Not only is this trend likely to accelerate as tablets and mobile devices gain a larger footprint in POS systems, but integrating payments with other systems will make it less likely that customers would replace Vantiv/Mercury. Vantiv first got into integrated payments with its $162.5m purchase of Element Payment Services in July.

While Vantiv’s revenue grew 14% in 2013, the company expects to post just single-digit percentage growth in 2014, so gaining a bigger stake in an expanding market like integrated payments is an attractive proposition. The deal also provides Vantiv with a new channel to target SMBs, as Mercury sells its services through software developers and a network of local POS distributors.

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