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How Mergers and Acquisitions May Actually Narrows the Scope of Innovation

Anand — Fri, 15 Jan 2010 13:36:47 +0000

Be it Automobile , Aviation or Heavy Metal Industries, everyone felt the heat of recession but regardless IT fared better than most. In spite of worst economic meltdowns in history, acquisitions among big vendors continued to reshape the market, operating-system wars extended to mobile battlefields, microblogging became a powerful source of real-time information, and the take-up of small, Net-connected devices was stronger than ever.

But how good is this wave of mergers and acquisitions for the future? ( By future I mean upcoming innovation and future of Startups which target innovation not business)

Whenever your biggest competitor takes you over, it blunts the competitive spirit that can drive innovations. Thats what concerns me most, the spirit of innovation is somehow compromised because of takeovers.

Not always always a potential Merger or Takeover can be taken as a positive sign of ever increasing competition and globalization. And particularly not right now when it comes to web and social media startups, many of which are still more focused on innovation and building up audiences than on making profits. Rushing them into deals to fulfill long-delayed plans for an exit strategy could derail the evolution of a strong business plan.

From an investment standpoint, founders and venture capitalists have good reasons to cash out now. Market caps of public tech giants are rising — the Nasdaq gaining big time – and so are their cash stockpiles. For Instance Microsoft has a stock pile of about $49 billion in cash; similar is the story of Google with $24 billion. High-profile Multi Billion dollar deals like the ones we had in recent times have a way of spurring on other acquisitions.

TimeWarner buying AOL and eBay buying Skype come to mind. Even snapping up a hot startup for its technology or talent — Google buying Dodgeball or Yahoo buying Flickr – can lead to culture clashes, customer anger and other disappointing results.

I tried to re-compile the list of some major takeovers which are substantial enough to change the future of computing. We are talking about some multibillion dollar mergers and acquisitions, where the Big gets even Bigger.

Oracle eclipses the SUN @ $7.4 Billion

This Merger can be coined as “father of all the Tech Mergers” announced last year. If the announced the deal went through, Oracle, the industry’s largest database software vendor would get an entry into the server and storage markets worldwide.

The acquisition, still pending, was announced in April, and may even be blocked because European regulators are contending that combining Oracle’s technology with Sun’s open source MySQL database would violate competition laws. Lets see if this deal goes through.

Xerox snaps up ACS in $6.4 billion

Another major takeover, Xerox pays about $6.4 billion in cash and stock for Affiliated Computer Services (ACS), a large IT and outsourcing firm. With this merger Xerox hopes it will give it a bigger foothold in the business services space. While the deal will surely boost Xerox, investors wondered whether it overpriced the deal.

Calling the ACS deal “a game-changer” for Xerox, Burns, CEO of the company, said it would help Xerox “expand our business and benefit from stronger revenue and earnings growth.” The deal will triple the service component of Xerox’s revenue to roughly $10 billion annually from $3.5 billion, according to the company.

Dell – Perot Catch-Up Deal worth $ 3.9 Billion

Buying Perot was a part of Dell’s plan to expand its footprint in the IT services market, which was a necessity in a time when hardware sales were falling. Dell offered a staggering $3.9 billion for Perot Systems, a 68% premium over Perot’s actual stock value. Dell’s purchase can also be seen as a response to rival HP’s $13.9 billion acquisition the previous year of EDS — another services company founded by Perot.

Cisco-Tandberg worth $3.4 billion

Cisco, already a major player in collaboration products with WebEx and TelePresence, signed an agreement in October to purchase videoconferencing vendor Tandberg, which makes both video devices and network infrastructure products. The acquisition, if completed, could have both a direct and indirect impact on Cisco’s bottom line, because expanded use of videoconferencing may increase network traffic, letting Cisco sell more switches and routers.

HP Acquires 3Com For $2.7 Billion

HP launched a straightforward assault on Cisco in their own Game of Networks. HP’s increasing influence in data center networking and convergence markets will have a big boost with its purchase of 3Com, a maker of switches, routers and security products. HP says the acquisition will further its data center strategy “built on the convergence of servers, storage, networking, management, facilities and services.” The acquisition of 3Com also help to expand HP’s Ethernet switching offerings, add routing solutions and significantly strengthen the company’s position in China thanks to 3Com’s strong presence in China. The transaction is expected to close in the first half of 2010.

I have collected the figures and numbers from various sources including PCWorld, Gigaom and Wikipedia. Let me know if you have a suggestion or correction to make. Please forgive me for the grammar, I was always bad in Grammar since school

Article Previosuly mirror-posted by me at Global Thoughtz.

Anand

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Microsoft blocks ads. what?

Georgia Psyllidou — Fri, 29 Aug 2008 08:57:44 +0000

Hey there, planet mainstream here, are you in for some blockbuster scenarios?

After 2 peaceful years of gardening new products and shopping (still checking if Yahoo comes in the right size) Microsoft has apparently decided to go extrovert and check out the competition. The new internet explorer, IE8, marketed as the “discrete one’ comes with features like ‘In Private Browsing’ that help you block away some aspects of commercial intrusion such as cookies, history lists, and ads.

Wait a minute, are ads angels or demons? It depends on whose side you are, ads are actually multifaceted like mood rings: their use and value are subject to the judge’s role, critical spirit, need of information.

Web ads are mostly seen as angels: they do no evil, they function more elegantly than on other media, probably that’s why people put up with them and other people have based business and state funding models on them.

Demonizing web ads is not part of the ‘InPrivate Blocking’ goals, free will rules. But with privacy on internet becoming a hot topic for regulation, InPrivateBrowsing is actually a do-no-evil, democratic timebomb.

[youtube=http://www.youtube.com/watch?v=4fMqJWoOjE4]

So, this is my scenario.

(late this summer, honey I’m home)

Microsoft is risking committing twice the same antitrust crime, expecting the ad-allergy to spread like a demon-ex-machina by means of ambient buzz (autumn leaves and dust).

(later this year, in the city)

In the same way we’ve rapidly become eco-aware, we begin paying more attention to our privacy.

(you’re just too good to be true)

As Google’s adwords becomes better and Google’s search engine becomes more personalized the results of these two tend to look alike. At some point, our contextual aesthetics react to the lack of difference in the typology of service. Allergy. (atsum)

(in the meantime, the trial)

Then, the second antitrust trial for Microsoft magnetizes ambient dynamics towards privacy awareness.

(whose side are we?)

People are mostly concerned with the direct impact of this issue on their lives rather than the health of the economic competition. This aspect works for Microsoft.

(in the spring, jingle bells blossom/ after the trial…)

As time goes by, behavioral reflexes are built on this awareness.

By highlighting that do-no-evil doesn’t equal do-good, the trial triggers the attitude of systematically using the ad-blocking features in IE or elsewhere (Firefox, Safari…)

(is the trial just a bad dream?)

Google on the other side is still our clean cut hero, our Brandon Walsh.. Fighting for free airwaves, for openness, for us, has chosen an original model of B2C partnership. Beyond a company it acts as a web NGO.

So what is the best path to protect its core business? The legal, the educational, the crowdsourcing or the self-transformational?

Will Brandon

a) complain to the highschool director ?

b) organize an ad-contest for the beach-club kids to campaign for homeless veterans ?

c) run for highschool president ?

d) or study hard to access UCLA?

…to be continued

Well, I also have some legal questions:

If InPrivateBlocking is banned, is the same feature declared non grata for other browsers as well ? What about other add-on programs-is size(impact) shaping legality?

How is the applicable legal domain chosen? Is it an issue of commercial or civil law and how is EU regulation restrictive in each case?

Piss o’ cake?

Georgia

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Is 2008 the year of instant communication nirvana?

Kari Silvennoinen — Fri, 28 Dec 2007 12:23:17 +0000

On the web, 2007 was the year of the social web. Things like Facebook and Twitter have accelerated the way people can interact socially even at a distance. It’s a bit obvious to say that our possibilities to communicate will only get better next year. Internet is a communication network beneath it all.

Innovation isn’t about copying and yet no doubt we’ll see copies of aforementioned services in 2008. This of course depends on how the US economy and therefore VC funds will hold up. As we have seen before, changes are quick and some of the huge web properties might end up irrelevant next year. Will something like OpenSocial really matter? We’ll see.

Below all this Facebook SaaS Web as a cloud ideology, there’s an undercurrent that I find very interesting. As I wrote in October when Google bought Jaiku, XMPP/Jabber/Google Talk is a technology to watch for. Since the acquisition, we haven’t heard much about Google’s plans for Jaiku. As I also wrote, I think it was the technology they were after, not the service itself. Could a social notification system built on RSS feeds, mobile phones and XMPP somehow fit Google’s strategy?

Google has strongly positioned GTalk as the communications platform across its many services. GTalk has been integrated for a while in GMail and to some extent this is similar what you get in Yahoo Mail/Messenger and Microsoft Live Mail/Messenger. You might have read about Google’s recent poorly received integration of GTalk into Google Reader. You may have noticed that Google Docs now offer collaboration through Google Talk. There’s even GTalk integration in Orkut and my sources tell me more is on the way. Even YouTube has availability information of people watching the same video as you (This isn’t probably based on XMPP, but could be?).

Because of their closed nature, MSN/Live Messenger, AIM or Yahoo Messenger cannot leverage their networks outside their own properties. Google Talk users can interact (to some extent) with any XMPP user and other developers can create services for Google Talk users. This is important in a world that is not desktop-bound, but where services and applications are in the web cloud.

For some time XMPP had the problem that it was too ahead of its time and could not compete with the big players. Social web and Google has changed these. Now Live Messenger is playing catch-up with upcoming features like “Multiple points of presence support”, which is something essential to the XMPP-protocol. Microsoft could overthrow other players in the IM market through distributing Messenger with their operating system, like they did with Internet Explorer. The rules of the game have changed on the web and Google has realized they can be the next IM king by integrating their solution everywhere they can. They can introduce Google Talk to anyone with a Gmail account and without any download.

If it isn’t clear enough from above, what I predict to continue in 2008 is integration of IM or instant communication on the web. We won’t see one unified network to rule them all or anything like it. We’ll see advances to a future telecom operators and their ads would want to us believe is today. Yet they’re the ones stonewalling the development of internet on mobile phones. In reality, they are defending their networks against their Internet and web-based rivals. We won’t see iPhone or Android making a big impact on the mobile market, not yet.

What I hope is that devices like Apple’s iPhone & iPod Touch and platforms like Google’s Android will make SMS obsolete preferably through something open and web-friendly like XMPP and not something cooked-up by telecom operators. Microsoft is already offering Live Messenger on mobiles, but these are deals with telecom operators. My hope lies with Google and Nokia in this one. (See for example Nokia’s Gizmo client for S60. Coincidentally, Gizmo uses XMPP for IM.)

And yes, I’m predicting an instant communication nirvana even though my contact list is still mostly empty.

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End Game for Microsoft?

Raj Sheelvant — Mon, 29 Oct 2007 14:43:22 +0000

Microsoft’s 1st fiscal quarter earnings were blow out. Its profit soared 23 percent to $4.29 billion, or 45 cents per share, from $3.48 billion, or 35 cents per share, during the same period last year, as brisk sales of the new ‘Halo 3′ video game, Windows and Office helped it breeze past Wall Street’s expectations. Because of this the stock hit 6 years high. The result, driven by products including Windows Vista and Office 2007, was viewed as evidence that the 32-year-old company still has growth potential. Underneath all this good news, I think, survival of Microsoft itself is at stake.

Let’s start by looking at Microsoft’s Business Strategy. Its core asset is its Operating System (initially DOS and then all the UI built on top of it). Using its core asset Microsoft has built a software empire. The ‘network affect’ created by its near monopoly market share (90%) of its Operating System (OS) has enabled an ecosystem of software solution providers around it. These value added software application have created the franchise of its OS more valuable. Microsoft itself builds and sells several add-on applications on top of its operating system. Microsoft Office is the most important of all the applications that’s built on top of its OS and has become the ‘cash cow’.

Microsoft’s strong ‘economic moat’ has been constantly attacked over the past 8-10 years. But it has aggressively managed to defend itself. Now, several disruptive offensive forces are making Microsoft’s moat vulnerable. First of all, SaaS or On-Demand software delivery model is going to be a formidable challenge to all the software applications written specifically for Microsoft OS. For example, Google Doc is a tempting alternative to Microsoft Office for the individuals and small organizations. There are several other open source on-demand applications that are getting ready for the prime time to challenge Office software. With Microsoft Office software being challenged with a new delivery model, it will no longer remain the cash cow. The advances in distributed computing and software security will keep pushing the boundary on SaaS delivery model. SaaS, with it pay-as-you-use payment model along with mobility access are some of the positive factors that will make even the large organizations investigate its usefulness in their organization. This is forcing software solution providers to break away from sole Microsoft OS franchise. Soon, most applications will also be offering with the On-Demand delivery model.

The other disruptive force is Virtualization. There is a huge demand to ‘maximize’ server utilization, and this is making Virtualization the highest priority for many company’s CIO. This trend will entice the application vendors to write their own kernels designed to run in virtual environment and knock off Microsoft OS from the server. With more technological innovation, virtualization will make Microsoft OS less relevant.

The third disruptive force is Demographics. The ‘iPod’ generation worldwide is more comfortable with Apple product and considers PC as “Dad’s” computer. The anecdotal evidence point out that majority of students entering university now own Apple computer. In few years the ‘iPod’ generation that will be joining the work force will be not ‘savvy’ enough to use PCs. The large organization’s IT department will be forced to provide infrastructure to support Apple Computer to attract new work force.

Virtualization, Demographic changes and On Demand Delivery model will work in tandem to make Microsoft’s core asset irrelevant. Its not that Microsoft does not understand the threats but it’s too big and too slow to change and challenge these above mentioned disruptive forces. Does that mean that Microsoft will vanish into thin air some day soon? Not really, but change is urgently needed at Redmond.

Currently, Microsoft organization looks a lot like IBM of 1970s. IBM had almost monopoly on the mainframe business and its ‘cash cow’ was add-on hardware services after installation. With the rapid emergence of PCs (lead by Microsoft), IBM tried several ways to fend off that disruptive force (first with denial, then by building their own OS). When every thing failed they went through massive restructuring. IBM evolved from a Mainframe Hardware Vendor into a Software Solution Provider. IBM of today is vastly different from IBM of 1970s. I contend that Microsoft will go through some painful metamorphosis similar to that of IBM. It will be forced to reinvent itself into a new company. Steve Ballmer is too much of an insider to effectively bring about successful change management. They need an outsider with new set of eyes and ears. I personally believe Ray Ozzie will be elevated to a more powerful role to guide Microsoft through these changes. They may even hire a few executives from outside to bring in some much needed changes. Microsoft will still be relevant in 2020 but what will be its core competency then, will be interesting to monitor. The days are numbered for the Microsoft in its current incarnation.

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