The Dell-EMC deal is huge, but where’s it headed?

I forget about Dell. It happens all the time — I see that cheerful, round, delightfully dated logo and have something of an “remember when?” moment. Dell hasn’t been a serious part of the big consumer device discussion in years, and some of that’s by design, really. Dell isn’t stupid — it knows that its strength in the PC market is waning and that soon, there won’t be enough meat on the bone to sustain a company that just made one of the biggest pure tech deals ever.

Today, the company made it official and announced the (inconceivably huge) $67 billion deal that’ll bring it together with EMC — making it, in Dell’s own words, “the world’s largest privately-controlled, integrated technology company.” This acquisition of EMC proves total recognition on Dell’s part that devices are not it’s way forward. Instead, Dell is targeting big IT and the enterprise market.

Information Technology and enterprise are aggressively unexciting arenas for consumers, but at a time when Apple, Microsoft, Amazon, Cisco, HP, Dell and everyone else are vying for a piece of the big enterprise pie (albeit in very different ways), it’s no small part of the vast technology landscape. The Dell-EMC deal is almost inconceivably massive, with that $67 billion price tag, but also serves as a larger indicator of what’s taking place in enterprise computing: consolidation.

“The market cannot continue to sustain all of these players,” said Glenn O’Donnell, Forrester’s Research Director for Infrastructure & Operations Professionals. “It’s going to continue to shrink into a number of mega-vendors.”

Dell’s trying to claw it’s way into a infrastructure and enterprise market that’s being rapidly devoured by cloud services–most notably, Amazon’s. Enterprise is where the money’s at, but it’s not a market that’s especially friendly towards fragmentation. So, is the Dell-EMC deal a game-changing power play or a $67 billion death rattle? That remains to be seen.

“They’ve got to consider how they’re going to play as a new and different vendor. Perpetuating the old-school IT model is not going to work,” said O’Donnell with regards to Dell going forward. “In the general landscape of technology, one big question has been looming…and that is: ‘What is the future for traditional tech? Are the HPs and the IBMs and the Dells and such really in a position to succeed in this new world order where the Amazons and the Microsoft Azures and the other cloud players are taking over…More and more of the IT investment is going into the cloud services, so what does that mean for these more traditional models?”

There’s a clear divide between hardware-heavy, old-school enterprise models and the light, agile enterprise solutions that are quickly eclipsing the clunky business tools of yore. Dell’s marketplace perception has long been one intrinsically tied to the devices it makes–the physical deliverables that are becoming a shrinking line item in its revenue stream.

“That is something that they need to move their messaging away from,” said Mukul Krishna, the Global Head of Frost & Sullivan’s Digital Media Group, “from a device company…to a much more agile, reconfigurable enterprise solution, scalable partner for the technology enterprise.”

To put it simply, big business is trying to lighten up and those not willing to join the cloud game and rethink flexible, scalable enterprise systems will be left behind. “Many of the technology companies who have taken a beating because they’ve focused on a very hardware-centric approach for a long time, have been trying to figure out what they need to do,” said Krishna.

So why these two companies? And why now? Well, rumors have been swirling around EMC for some time in light of stalling growth. And Dell? It’s looking to reinvent.

“One of the main reasons that Dell went private is because it wanted to restructure itself without all of the scrutiny,” said Krishna. “Buying someone like EMC that has been for a long period and has a very strong pedigree of selling that enterprise market was a very, very good thing because they immediately solved the perception problem.”

Effectively pulling EMC off of the market will allow Dell-EMC to make decisions without the scrutiny that comes from answering to the slew of investors that come with the public trading territory.

“The major attractiveness is that by merging with Dell and taking the company private it puts EMC’s assets in the hands of an owner that understands the value of EMC’s technology and also provides clear leadership in Michael Dell (as Joe Tucci retires),” said Matt Eastwood, an analyst with IDC. “The go private nature allows the company to make long term strategic bets around cloud, security, and analytics which will be critically important for the company in the future. The investments are difficult to defend as a public company looking where investors have a shorter term horizon for their returns.”

And as a company that needs to rethink its strategy for staying relevant in an enterprise conversation that’s quickly taking off towards the cloud, that freedom to maneuver may prove to be vital. Or, shall we say, Pivotal.

Pivotal is a joint venture between EMC and its most notable offspring (VMware) and was designed to compete with the enterprise cloud giant, Amazon Web Services. Dealing in big data and cloud computing, Pivotal encapsulates much of what Dell-EMC needs to become to keep up with the burgeoning enterprise market.

“The assets and strategic direction of the Pivotal umbrella cannot be overlooked,” said Laura DuBois, an IDC analyst. ” There is a change underway in enterprises – custom applications and being written in new ways, mimicking the direction Pivotal has taken.  These new applications lend themselves to server-based storage approaches.  So Pivotal gives Dell expertise in the app dev side and Dell provides the infrastructure software and systems.”

What about everyone else? We’ve established that enterprise is a big market with big margins. Where does a $67 billion deal leave the rest of the enterprise players? In short, it may lead to significant changes in enterprise technology cooperation.

“For the broader technology market, there will be shifts in strategy and partnerships that emerge,” said Eastwood. “For example, Cisco (a long term strategic EMC and VMware partner) may need to strike deeper alliances with others including NetApp, Microsoft Citrix, etc.  At the same time, Lenovo (another EMC storage partner) may be drawn closer to IBM for their storage needs.  Longer term, I believe the merger or EMC and Dell together will create the biggest headaches for HP Enterprise as they have many of the same hardware assets but Dell will now have deeper software assets in security, data management, virtualization and software defined infrastructures.”

Good BlackBerry Picking: BlackBerry Acquires Good Technology

BlackBerry Limited (NASDAQ: BBRY; TSX: BB) announced this morning that it has entered into a definitive agreement to acquire Good Technology for $425 million in cash. This move immediately strengthens the reinvented BlackBerry’s position as a provider of cross-platform mobile security services for enterprises. For Good, this acquisition was a logical, inevitable exit.


Back in the early days of enterprise mobility, BlackBerry ruled the market with its BlackBerry Enterprise Server (BES) and BlackBerry Messenger (BBM) offerings. However, those products were tied to the company’s hardware offerings. When BlackBerry’s share of the mobile phone market plummeted after the introduction of the iPhone and Android-based handsets, demand for BES and BBM also took a big hit, despite their technical strength.
Recently, BlackBerry has been reinventing itself as a provider of cross-platform mobile security services for enterprises. While the company has demonstrated some success in executing on that position, the market has remained skeptical. As Fortune’s Jeff Reeve’s pointed out this morning, BlackBerry is unprofitable with a lot of negativity priced into its stock. The company is currently valued at less than 1.3 times next year’s sales and only slightly above the cash on its books.
Clearly, BlackBerry needed to do something to bolster the credibility of its strategic market positioning. Today’s acquisition of Good Technology immediately strengthens both BlackBerry’s technical ability and street cred as a provider of cross-platform mobile security services for enterprises. Good’s portfolio of Enterprise Mobility Management (EMM) offerings was one of the best available and highly complementary to BlackBerry’s, as noted in the latter’s press release:

“Good has expertise in multi-OS management with 64 percent of activations from iOS devices, followed by a broad Android and Windows customer base. This experience combined with BlackBerry’s strength in BlackBerry 10 and Android management – including Samsung KNOX-enabled devices – will provide customers with increased choice for securely deploying any leading operating system in their organization.”

For Good Technology, this acquisition was a logical, if not inevitable, exit. As I wrote in A market overview of the mobile content management landscape  (summary only; subscription required for full text) just over a year ago,

“Many platform vendors have already acquired MDM and MAM capabilities, so the viability of the numerous, remaining pure-play vendors of those technologies looks increasingly dim. Instead, future acquisitions by platform vendors are more likely to echo VMware’s recent (January 2014) purchase of AirWatch and its well-rounded suite of EMM technologies. MobileIron launched a successful IPO earlier this month and looks to remain independent for the time being. Good Technologies recently filed its own IPO registration paperwork but could be acquired either before or after the actual IPO.”

And so it is. MobileIron remains the last major independent EMM vendor standing and Good has been acquired. It seems that Good really had little choice. They were $24 million in debt when their filed their S-1 (16 months ago) and never completed the intended IPO. It is very likely that they continued to lose money since then. According to CrunchBase, Good had taken on an undisclosed amount of secondary market funding a month after the S-1 filing and received an $80M private equity investment in September, 2014.  It’s highly likely that a combination of slowing revenue growth and a non-existent road to profitability led Good’s management and investors to take BlackBerry’s acquisition offer.
The looming question is will its newly-expanded portfolio of enterprise mobile security capabilities be enough for BlackBerry to accelerate its turnaround? Investors are reacting positively to the news. BlackBerry’s stock is currently up 1.54% while the broader NASDAQ is down -1.04%. Of course, only time will tell. Success will depend on how quickly BlackBerry can integrate Good’s technology into its own and how well they can sell the combined platform.

Uber buys a mapping company, but this isn’t its first acquisition

Uber bought mapping company deCarta today, as first reported by Mashable and confirmed by the on-demand ride company.

The San Jose-based startup provides technology for turn-by-turn navigation and local search with its software system. It powers the mapping backend for consumer-facing apps. Uber explained that deCarta will help Uber fine-tune the way it calculates ETAs, benefiting products like UberPool.

A spokeswoman also told me that this isn’t Uber’s first acquisition. She said, “We have made a very small number of other acquisitions. We haven’t disclosed the companies.”

The transport giant must have bought the other companies a some point in the last five months. During TechCrunch Disrupt in September 2014, Uber CEO Travis Kalanick said he hadn’t made any acquisitions yet because he’s been focused on “product” instead of “M&A,” or mergers and acquisitions. It’s unusual for a company of Uber’s size and influence to have made no acquisitions for technology or recruiting purposes, so it makes sense that the situation changed in the last five months, as Uber raised billions more in venture funding.

Now, to figure out exactly which companies Uber secretly purchased…

This story has been updated, with a new headline, after Uber confirmed it made other acquisitions in the past.

PayPal acquires Paydiant, puts NFC into its Here readers

PayPal is buying Paydiant, a startup that provides the mobile payments and loyalty technology used by many big-name retailers use in their apps, for an undisclosed amount. PayPal also announced on Monday that it plans to start selling a near-field communications (NFC)-enabled version of its Here credit card reader, which will allow its merchants to start processing Apple Pay, Google Wallet and contactless card transactions.

Paydiant is the behind-the-scenes technology used by companies like Subway and Capital One to put payment options, loyalty programs and digital coupons into their apps. But its biggest customer is MCX, a consortium of big retailers including [company]Walmart[/company], [company]Target[/company], [company]Sear[/company]s, [company]Wendy’s[/company], [company]Exxon[/company] and [company]CVS[/company] that is launching its own digital wallet called CurrenC. You’ve probably MCX’s name pop up in the news lately as its members have butted heads with Apple for turning off NFC at their registers, effectively blocking Apple Pay for some of the biggest retail stores in the country.

At Mobile World Congress in Barcelona, I spoke briefly with PayPal’s senior director of global initiatives Anuj Nayar, who said Paydiant gives the payments giant another set of commerce tools to offer its merchants customers. While Paydiant focused on larger retailers, PayPal will be able to scale its products down to its vast network of small retailers. “We can create a digital loyalty program for the corner coffee shop,” Nayar said.

PayPal’s new NFC reader will be similar to the stand-alone point-of-sale terminal it launched in the U.K. two years ago. It has a numeric keypad with a slot for Chip-and-PIN card transactions and a Bluetooth radio to connect to a smartphone or tablet where PayPal’s Here app processes the transaction. The addition of NFC means it will accept contactless transactions from mobile wallets like [company]Apple[/company] Pay, [company]Google[/company] Wallet and eventually Samsung Pay (PayPal’s own mobile wallet doesn’t use NFC). It will also take payments from contactless credit cards popular in many countries outside the U.S., which is why PayPal first will roll out the terminal in the U.K. and Australia this summer and then launch in the U.S. later this year, Nayar said.

When it does come to the U.S., the reader will pull double duty as PayPal’s next-generation credit card reader. This year, retailers are beginning the transition to EMV cards, which use smart chips instead of magnetic stripes to transmit encrypted data at payment terminals. The familiar triangular PayPal Here reader in the U.S. accepts magnetic stripe transactions only, and I assume it will be gradually be phased out as more merchants move over to EMV payments.

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Google buys Softcard, teams up with carriers on mobile payments

Google and the mobile carriers have long been at odds over mobile payments, but faced with the runaway success of Apple Pay, the two rivals have become friends. AT&T, Verizon and T-Mobile are selling their mobile wallet joint venture Softcard to Google for an undisclosed amount, Google and Softcard revealed on Monday in separate blog posts, and they have agreed to pre-install Google Wallet on their Android smartphones starting this fall.

That’s quite a full circle to arrive at, considering that for the last three years the three operators actively blocked Wallet from their devices in blatant protectionism for their own mobile payments service Isis. The problem was that Isis, which changed its name to Softcard last year, was slow to arrive to market, meaning few Android phones had access to any kind of near-field-communications (NFC)–based wallet.

That left the nascent smartphone contactless payment market stillborn in the U.S. until [company]Apple[/company] stepped in with Apple Pay. Apple Pay is not only available on every iPhone 6 and iPhone 6 Plus (as well as the forthcoming Apple Watch), but it also built in a much bigger ecosystem for its service, bringing card-issuing bands and online merchants to the table that neither [company]Google[/company] nor Softcard managed to attract.

Those two also-ran wallets are obviously feeling Apple’s heat, so instead of battling it out in the Android space, they’re teaming up, which should make banks, merchants and especially Android-owning consumers happy. It probably would have made more sense to sign this deal a year earlier, though, as other companies are trying to fill the vacuum the Isis-Google war created with their own Android wallets.

Samsung last week bought universal digital credit card startup LoopPay, which uses an alternate technology to NFC that gives it access to most point-of-sale terminals in the market. As I wrote last week, Samsung still has to add a few missing pieces to its payments puzzle – most notably direct partnership with the banks – but there’s a good chance we might see the first Samsung contactless payments app debut in the Samsung Galaxy S6 when it is unveiled at Mobile World Congress next week.

BT agrees to $19B takeover of EE, paving way for close DT relationship

The negotiations are over: pending regulatory approval, BT will get back into the U.K.’s mobile scene in a big way by buying EE from Deutsche Telekom and Orange for £12.5 billion ($19 billion).

This means BT will be able to sell fully-converged bundles of fixed and mobile connectivity, telephony and pay TV services. It will also leave Germany’s Deutsche Telekom as BT’s biggest individual shareholder, and DT’s chief is already talking about the big European national telecoms giants working together more closely in the future.

“The UK’s leading 4G network will now dovetail with the U.K.’s biggest fiber network, helping to create the leading converged communications provider in the U.K.,” BT CEO Gavin Patterson said in a statement. “Consumers and businesses will benefit from new products and services as well as from increased investment and innovation.”

The companies began exclusive talks in December last year after BT said it was interested in buying either EE or O2. After BT and EE went exclusive, Three UK owner Hutchison Whampoa said it was in talks to buy Telefónica’s O2.

If both those deals go through, the U.K. will be left with three network-owning mobile operators, rather than four (the other one is Vodafone). Regulators will need to take this into account, along with the various chunks of spectrum that the companies own — despite only explicitly talking about business services at the time, BT bought 4G spectrum in 2013’s big auction.

It remains to be seen whether Europe’s competition regulators will take an interest, or whether it will be down to the UK Competition and Markets Authority.

EE is the U.K.’s largest mobile carrier, comprising as it does two former carriers, T-Mobile UK and Orange. It has 24.5 million direct mobile customers, 834,000 fixed broadband customers and a bunch more people who use EE mobile services resold under different virtual operator brands. In total, it services 31 million people, or roughly half the country.

The deal will be a cash-share combination, leaving Deutsche Telekom with a 12 percent stake in BT and one non-executive board member, and France’s Orange with a four percent stake.

“The transaction is much more than just the creation of the leading integrated fixed and mobile network operator in Europe’s second largest economy,” DT CEO Tim Höttges said in the statement. “We will be the largest individual shareholder in BT and are laying the foundations for our two companies to be able to work together in the future.”

Amazon and Sprint may pick over RadioShack’s remains

After getting suspended from the New York Stock Exchange, RadioShack is probably headed for bankruptcy, but it looks to have a couple of potential buyers lined up to take over its retail stores. Both Amazon and Sprint are weighing bids for some of RadioShack’s 4,000 U.S. locations, according to two separate reports from Bloomberg.

[company]Sprint[/company], which Bloomberg says is interested in 1,300 to 2,000 stores, might mainly be interested in [company]RadioShack[/company] for defensive reasons since RadioShack is one of its big reseller partners. The electronics chain has not only long sold Sprint phones, it also carries its prepaid Virgin Mobile and Boost Mobile brands. [company]Amazon[/company], however, would be tackling some entirely new: brick-and-mortar retail.

Amazon, too, is only interested in some of Radio Shack’s locations, Bloomberg reported, but those stores could serve as showcases for its increasing number of mobile devices, living room gadgets and services. Amazon could also use the stores as physical pick-up and drop-off locations for customers, as well as provide immediate face-to-face tech support the way Apple does in its Genius Bars.

AT&T goes pan American, closing its $2.5B Iusacell deal

AT&T is now officially the first North American mobile carrier to run networks on both sides of Rio Grande. On Friday, Ma Bell announced it has finalized its $2.5 billion acquisition of Mexico’s Iusacell from Gurpo Salinas.

The deal doesn’t bring that many new subscribers to its network – Iusacell’s 9.2 million subscribers puts it in a distant third place to Mexican wireless giant América Móvil — but it gains access to a GSM and CDMA network covering 120 million people. AT&T is promising to create a unified network covering 400 million people in North America, though I doubt that will mean the in-network coverage on a standard AT&T plan will suddenly extend to Mexico City and Oaxaca.

Chances are AT&T will start marketing specific plans for frequent cross-border travelers in both countries as well as sell calling features that make it cheap or free to call Mexican landlines and mobile numbers from the U.S. and vice versa. América Móvil does much the same thing through its U.S. mobile virtual network operator TracFone. For instance, one of TracFone’s brands Telcel América is named after Móvil’s primary brand Telcel in Mexico, an it offers a $60 plan that includes 1,000 calling minutes to mobile numbers in Mexico and unrestricted calling to landlines in Mexico along with unlimited talk and text inside of U.S. borders.

AT&T appointed a 19-year Ma Bell vet Thaddeus Arroyo as CEO of Iusacell, and he will be assisted former CEO Adrian Stickel in the transition. I suspect they’ll have a big integration task ahead of them. It takes a lot more than just duct tape and superglue to fully combine two national networks, though the fact those networks are in completely different geographies helps. Iusacell is also in the process of transition from CDMA technology to GSM, which will make roaming between the two countries a lot easier.

AT&T has also committed to bring LTE services to Mexico, which Ma Bell helps will be key to growing Iusacell’s customer base. Mexico has a rapidly growing middle class, but its smartphone penetration is roughly half that of the U.S. LTE and smartphones go hand and hand, so 4G represents a big opportunity for the combined carrier, AT&T said in a statement.

Iliad’s Xavier Niel buys Orange Switzerland, growing his empire

French telecom tycoon Xavier Niel may have seen his offers for T-Mobile US rebuffed, but it looks like he’s going to get his hands on a mobile carrier after all. Niel’s private holding company NJJ Capital is buying Orange Switzerland for €2.3 billion (U.S. $2.8 billion) and expects to close the deal in the first quarter after getting regulatory approval.

This deal is a bit different from the [company]T-Mobile[/company] bid, since Neil is buying it direct through private equity. Over the summer, French ISP [company]Iliad[/company], which Neil founded and controls, offered to buy Deutsche Telekom’s controlling interest in T-Mobile US, but [company]DT[/company] and T-Mobile turned it down.

Niel has had more luck on Europe where he bought Monaco Telecom from [company]Cable and Wireless Communications[/company] in April. Orange Switzerland, however, is a far bigger prize, and ironically it bears the name of one of Iliad’s biggest competitors in France. Orange Switzerland isn’t part of the [company]Orange[/company] Group anymore. Orange sold its Swiss operations to Apax Partners in 2012 after Apax won a bidding war that included – you guessed it – Xavier Niel. There have also been reports that Iliad is interested in buying French mobile competitor Boygues Telecom, though Niel has downplayed them.

There’s no word yet on what Niel will do with the Swiss mobile carrier if and when the deal closes. In France, Iliad’s Free Mobile has set off a price war, driving down mobile rates across the country. We might see the same thing across France’s alpine border.

Three UK owner also considering EE or O2 buy, report claims

The one-time U.K. monopoly carrier BT may be sniffing around O2 and EE as it considers how best to get back into the mobile carrier game, but it seems it’s not the only one. According to a Reuters report, Hong Kong’s Hutchison Whampoa is also considering a bid for one of those companies. Hutch already owns Three, the smallest U.K. mobile network operator, so this would reduce the number of network-owning cellular players in the country down to three (the other being Vodafone). Three and EE already have a network-sharing deal that involves a joint venture called MBNL, so integration would be easier on that front. EE is jointly owned by Germany’s Deutsche Telekom and France’s Orange, and O2 by Spain’s Telefonica.