The carrier industry has entered an equivalent period of contraction and consolidation.
In what is the high water market of pure tech acquisitions, Dell has announced that it will be buying EMC in a 67 billion. Shareholders will see a two part deal: $24.05 a share in cash, and a tracking stock that represents VMware, the virtualization subsidiary that EMC controls, and holds 80%: 20% of the shares of VMware are public. Since VMware is a publicly traded company, EMC shareholders will get 0.111 shares of this new VMware tracking stock for each EMC share. The idea of a trading stock is to allow the value of the subsidiary to be represented independently of the financial situation of the parent.
The biggest questions surrounding the acquisition are the amount of debt being taken on to make it happen, and the state of the enterprise technology market.
It’s been estimated that Dell will have to take on more than $40 billion in new debt to finance this deal. Obviously, Michael Dell and his partners — Silver Lake and others that worked with him to take Dell private last year — believe this new debt, on top of the estimated $13.5 billion from privatizing Dell — can be paid off by the new combined entity. And EMC is likely to provide over $55 billion to Dell’s top line, making it the largest enterprise tech company, with combined flows of $80 billion.
EMC has been under the gun, with activist investor Elliott Management stirring up shareholder anger, and arguing that VMware should be spun out or sold off. Joe Tucci, EMC’s CEO was supposed to have resigned in February, but has stayed on to deal with the company’s travails. A rumored deal with HP fell through, which is perhaps why EMC’s board accepted what looks like a less rich offer from Dell.
Is getting bigger actually better, at this juncture in the market? It may lead to more runway in what looks to be a battle of attrition with Amazon on one side — Amazon made a barrage of announcements last week of new offerings in cloud computing to complement the company’s AWS — and open source software, like Hadoop, on the other.
Michael Dell is not one to shy away from making large bets, and it’s likely that this play will provide him and the new, expanded Dell with more strategic options and scope. But there is no doubt that the market he is growing large in is decreasing in overall size. PC sales are dropping steadily, and while Dell has remained the major player in that space — and shrinking less slowly than competitors — the overall trends are fairly clear. However, Dell is now the largest player in that market, and Michael Dell is likely planning on using the cash flow from a market in transition to transition the company into new — and growing — markets. The challenge is to manage that nimble transition over the next five or ten years with an $80 billion/year behemoth. He’s placed his bet, and we will have to wait to see how the chips fall.
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.
Deep pockets may be an essential element for competing effectively in the exploding on-demand economy. Today, the on-demand cleaning services company Homejoy announced it was closing shop on 31 July, after encountering stiff headwinds in the one-two punch of legal challenges to the labor status of its cleaning contractors, and the impact on funding that four pending lawsuits was causing.
Homejoy has been confronted by a growing list of court cases, and does not have the deep pockets that other on-demand players like Uber and Handy have. Or for that matter, Google and Amazon have.
As I explore in greater depth in a new research note, Handicapping On-Demand Market Sectors, this sector of thee on-demand economy may be a place where only the strongest survive. In that report, I characterize the slew of Uber-ish companies as on-demand displacers:
Services like Uber, HomeJoy, and Handy are operating in marketplaces where there established companies use a blend of contractors and employees to provide conventional services, like home cleaning or limo/taxi driving. These newcomers are polarizing the debate — and winding up in court — by attempting to maximally displace liabilities, expenses, insurance, regulatory fees, and taxes onto workers (and local governments) while maximizing their control on the way the work is done. These companies want everything to benefit them, for maximum control and profits. This group is going to face many legal challenges, and these on-demand disruptors are drawing the attention of presidential candidates.
Google has confirmed it will be hiring around 20 of Homejoy’s product development team, as it gears up to make a massive push into the home services space. However, it may be employing a very different business model — acting as a broker for truly independent contractors, and not an Uberish umbrella corporation, trying to have it both ways.
And obviously, there is going to be a lot of tectonic change in the foundations of work because of these forces.
I always believed that a productivity toolset requires a task management capability, and Microsoft has just stepped up to the bar on that, acquiring 6Winderkinder, the company behind Wunderlist.
I haven’t looked at Wunderlist since last August (see New releases from Asana, Wunderlist, and Timeful) so I better take a look, and ping them to see what the plans are for integration with other Microsoft tools and platforms, like an integration with Office 365, for example.
(reposted from Microsoft acquires Wunderlist on stoweboyd.com)
Pixelapse has announced the company is being acquired by Dropbox:
We started Pixelapse with the mission of building the definitive version control and collaboration platform for creatives. Since then, we’ve been fortunate to become a part of the daily workflow of tens of thousands of freelance designers and creative teams. The prospect of developing products at Dropbox that expand this vision to millions of users is tremendously exciting.
Our new development efforts will be focused on bringing the same kinds of collaboration and workflow experiences that you’re used to in Pixelapse over to the core Dropbox product. Pixelapse as a standalone product will continue to operate and be supported for the next year as we work towards this goal, at which point we’ll offer a migration plan for your work.
I got my start in technology studying computer science, and worked on program environments: tools for programmers. One of the most essential is version control, where changes introduced into software can be managed very carefully, and various versions of similar bits of software — for example, different compiler back-ends targeting different chips — can be controlled in a single artifact, and by judiciously extracting the correct version could lead to assembling a working chunk of code — for example, a C compiler for BSD Unix running on a 68K chip. The same sort of treatment goes on in document management tools, as well.
I always wondered why someone hadn’t built the same solution for design. It seems that Pixelapse has done so, and now will be rolled into Dropbox.
Pixelapse is another Y combinator alum, and raised an undisclosed amount in two rounds of funding.
Only last week, Dropbox announced the acquisition of Cloudon (see Dropbox acquires Cloudon). The company is on a tear.
Slack has announced the acquisition of Y combinator alum Screenhero, and will be integrating that company’s voice, video, and screen sharing capabilities into Slack over time. Screenhero will continue to operate for existing customers, and starting now, Slack paying customers will be able to use it, as well, but new signups to Screenhero will be blocked. At some point in the future the independent service will be wound down.
Some posts earlier in 2014 at the Screenhero blog mentioned integrations with Hipchat and Flowdock, Slack competitors. I wonder if those will be supported going forward? It seems unlikely, but I will try to find out.
Update 10:35am PT: Katie Wattie (handling PR for Slack) responds that current Screenhero accounts will continue, until the service is fully integrated and then wound down. At that time, independent Screenhero accounts will be closed, and the Flowdock and Hipchat integrations will no longer work.
I’ve met with two of the founders of Cloudon — Milind Gadekar and Jay Zaveri –several times in 2014, and I was unsurprised to learn that Dropbox had stepped forward to acquire the company this week. Cloudon’s newest effort — a tablet document editor that incorporated a novel and intuitive gestural interface (see CloudOn rolls out mobile Microsoft Word compatible co-editor) — is a really ambitious push to challenge Microsoft, and I’m betting that is soon going to be integrated into Dropbox in a smart way.
The two companies declined to state what the deal was, but they have announced that the existing Cloudon products will be shut down on March 15 (Cloudon also has a virtual Office app for iPad: see CloudOn brings Microsoft Office to iPad, but it doesn’t work on my Mac).
Cloudon raised $26 million from a crowd of investors, including The Social+Capital Partnership, TransLink Capital, Foundation Capital and Rembrandt Venture Partners. I’m betting something over $100 million, at least. The company has more than 9 million users, and offices in Israel, San Francisco, Seattle, New York and Dublin, Ireland.
Cloudon’s 30 employees represents the largest single acquisition for Dropbox, and the Israel office will become a center for aggressive hiring for Dropbox, according to reports.
[Update 2 Dec 2014 — Microsoft’s Rajesh Jha confirmed that they have acquired Acompli, writing that Microsoft did so as a part of its commitment to mobile experience:
In a world where more than half of email messages are first read on a mobile device, it’s essential to give people fantastic email experiences wherever they go.
An overeager Microsoft exec, Rajesh Jha, created a post on the official Microsoft blog with the URL http://blogs.microsoft.com/blog/2014/11/25/microsoft-acquires-acompli/, as reported by Mark Wilson, which as the URL indicates, makes it look like Microsoft has acquired Acompli. Acompli is an email application with integrated calendar that some have called the mobile Outlook that Microsoft should have made. When you click the link it takes you to a ‘page not found’ landing page, but Mark Wilson has a screenshot of a page that has apparently been deleted.
Accompli has several clever features, including a people-first presentation of email, and a means to quickly share available times for meetings via email.
I expect we’ll learn more about this turn of events after the Thanksgiving holiday week. It is likely that the deal is done, since creating a blog post about it would be one of the last things to be done.
As sports viewing increasingly goes over-the-top and mobile, taking the traditional broadcast audience with it, big-ticket, broadcast-only rights deals are going to grow increasingly problematic for the broadcasters.