Merger & Acquisition by top Technology companies

Merger & Acquisitions by Big IT CompaniesA study to identify the trend and strategy

Prof. R. Srinivasan (CSP)

Naveen Kumar K E (2008040)Satyajit Paul (2008046)

Date – 19-Mar-2011

PGSEM Final Year Project

Project OverviewUnderstanding the strategies of the large Tech Companies by analyzing their acquisitions. Our study should help us develop an in depth understanding about the emerging technology trends & innovation and how those technology trends & innovation influenced the strategies of large technology companies.

Methodologies Selection of companies based on predefined criterion. Data Collection Sources include company websites, Press Releases, SDC, Gartner Press Releases, Data Monitor. Study the individual companies. Develop the Taxonomy of Software Companies and find the market size. Fit them into the Taxonomy of Software Companies. Study the acquisitions of the companies over last 5 to 7 years Study some of the high growth segments. Observations & Insights. Predictions.

Selected CompaniesHewlett-Packard

IBM

Microsoft

Oracle

Dell

Cisco Systems

Intel

SAP

EMC

Criterion Used for filtration

•Fortune Top 100 companies by Revenue.•Fortune Top 50 companies by Market Value.•Fortune Top Computer Software Companies.•Fortune Top IT Services Companies.•Companies having operations in India.

Worldwide IT Spending

Longer-term, server spending will be curtailed by virtualization, consolidation and, potentially, cloud computing.

The infrastructure market (all the software to build, run and manage an enterprise) is the largest segment in terms of revenue and the fastest-growing through the 2014.

The hottest software segments through 2014 include virtualization, security, data integration/data quality and business intelligence.

Web conferencing, team collaboration and enterprise content management are forecast to have double-digit compound annual growth rates (CAGR), in the face of growing competition surrounding social networking and content.

Computing Cycles

Source – Morgan Stanley (Nov, 2010)

Taxonomy of Technology Cos

Semi conductor

Storage

Servers

Virtualization

Operating System

Database

Middleware & Integration

Application

Cloud

Software ServicesERP

CRM

Supply Chain

BI&Analytics

Servers, Tools & Platforms

Security & Com

pliance

Networking

Application Dev Software

Network & Nt Srvc Mgmt

Network Infrastructure

Content Managment

Software as Service

Platform/HW as Service

Proj. & Portfolio Mgmt

IT Infra Mgmt

Unified Communication

Competitive Positioning - Present

Semi conductor

Storage

Servers

Virtualization

Operating System

Database

Middleware & Integration

Application

Software Services

Servers, Tools & Platforms

Networking

2005 2006 2007 2008 2009 20100

5000

10000

15000

20000

25000

30000

ServicesHardwareSoftware

Major Acquisitions -PeopleSoftSiebelHyperionBEA SystemsSun Microsystems

Revenue in Software business growing substantially.

With acquisition of Sun, Oracle has entered Hardware segment.

Company Analysis - ORACLE

Company Analysis - IBM

Major acquisitions:Sterling CommerceCognosNetezza

Divestitures:Personal ComputingPLM Software

Most recent focus Cloud IntegrationBusiness Analytics

Incremental Growth in Software, Middleware and Services

2005 2006 2007 2008 20090

10000

20000

30000

40000

50000

60000

70000

80000

90000

100000

Services#REF!#REF!Software

2005 2006 2007 2008 2009 20100

20000

40000

60000

80000

100000

120000

140000

Imaging and Printing GroupPersonal Systems GroupServicesStorage & ServersSoftware

Company Analysis - HP

Major Acquisitions – EDS3PAR3Com, Palm Inc.Mercury

•Strong growth in Services Revenue•Consumer segment revenue stagnant•Drastic reduction in revenue from HP Software•Lack in Enterprise Software Offerings.

Company Analysis – SAP

Two major acquisitions1) Business Objects (Analytics)2) Sybase (Mobile Solutions)

Company Analysis - Intel

1. Strong focus on Mobile & Security2. Plan to compete with ARM technology for smart phone chips.

2005 2006 2007 2008 2009 20100

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Desktop PCMobilitySoftware & Periph-eralsServicesStorageServers and Network-ing

Company Analysis - Dell

Major acquisitions:Perot SystemsEqual LogicCompellent

Some recent – OcarinaBoomiSecureWorks

•Major decline in Desktop PC segment•Slight increase in Laptop segment

•Average performance in other segments

Company Analysis - EMCMajor acquisitionsVMWare (2003)RSA SecurityData DomainIsilon Systems

Very strong on storage segment.

% Share of Storage companies adopting VMWare for virtualization.

2005 2006 2007 2008 2009 20100

50001000015000200002500030000350004000045000

ServiceOtherAdvanced TechnologiesSwitchesRouters

Company Analysis - CiscoMajor acquisitionsScientific AtlantaWebexNavini Networks

StarentTandberg

Major growth noticed in Unified Communications (Video, Internet technology) – reaching the end user segment.

Company Analysis - Microsoft• No big ticket acquisition but lot of small acquisitions, attempted Yahoo! buy.• Strong Presence in all the segments of Enterprise Software & Development Tools.• Enjoys the competitive advantage due to the use of in-house closed technology.• It has created a niche and enjoys monopoly in that space leading to extra-normal

profit on all it’s softwareofferings.• High focus on Mobility and Entertainment Business.• One stop shop.

2005 2006 2007 2008 2009 20100

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Entertainment and Devices DivisionMicrosoft Business Di-visionOnline Services DivisionServer and ToolsWindows & Windows Live Division

2005 2006 2007 2008 2009 20100

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

Windows & Windows Live DivisionServer and ToolsOnline Services DivisionMicrosoft Business Di-visionEntertainment and Devices Division

Acquisitions by Segments

BI & Analytics – Major Acquistions

2006 2007 2008 2009 2010 2011

Storage– Major Acquistions

2007 2008 2009 2010 2011

2007 2008 2009 2010 2011

Virtualization– Major Acquistions

2007 2008 2009 2010 2011

2007 2008 2009 2010 2011

Rembo Technology

Networking– Major Acquistions

2007 2008 2009 2010 2011

2007 2008 2009 2010 2011

(ProCurve )

Middleware – Major Acquistions

2007 2008 2009 2010 2011

2007 2008 2009 2010 2011

Trends – Mega Vendors

ERP

CRM

BI & Analytics

MiddlewareServer/Storage

Database Vendor

Mega Vendor

BI & Analytics

Cloud

Smarter Planet*

Server & PC Co

Mega Vendor

Trend - Microsoft

Pureplay Software

Mobility

Cloud Computing

Trends – Niche Players

Wireless

Mobility

Security

Virtualization

SecurityPrivate Cloud

Web Collaboration

Video Collaboration

Unified Computing

Semi conductor

Storage

Network Infra

The Infrastructure Battle

Virtual Computing Environment (VCE)

Cisco

VMWare

Intel

EMC

Strategic Focus Area

BI & Analytics, Integration

Storage, Mobility, Services

Storage, Virtualization, Security

BI, Middleware

Mobile Apps, Database

Storage, Mobility, Services

Wireless, Security

Collaboration/Video, Unified Computing System

Mobility, Cloud Computing

Strategic DirectionMega Vendors Focused Vendors

Insights IBM & Oracle stands out in managing acquisitions well including divestitures. IBM is best positioned for one-stop-shop offerings to large enterprise customers. Oracle is one-stop-shop in making. It lacks Services offering in order to grab big

scale enterprise deals. Cisco, EMC and Intel – a significant strategic alliance in making, will give IBMs and

HPs run in Storage and Cloud space. HP & Dell lacks strategic direction in the acquisitions. Microsoft has most coherent cloud strategy for the end users – both SMEs and

large enterprises.

Money Matters

Company name P/E ratio Mkt Cap ($ b) Revenue ($ b) Net profit margin (%)Microsoft Corporation 11.47 227.37 62.48 30.02Intl. Business Machine... 14.24 204.79 99.87 14.85Oracle Corporation 25.32 170.17 65.22 22.87Intel Corporation 10.8 123.5 43.62 26.76Cisco Systems, Inc. 14.28 104.48 40.04 19.40SAP AG (ADR) 29.08 71.69 16.9 14.57EMC Corporation 30.9 56.24 17.01 11.58Dell Inc. 11.42 29.78 61.49 4.28Hewlett-Packard Company 13.18 105.84 126.03 6.95

Microso

ft Corporati

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Intl. Busin

ess M

achine..

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Oracle

Corporati

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Intel Corp

oration

Cisco Sy

stems, I

nc.

SAP AG (A

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EMC Corp

oration

Dell In

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Hewlett

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Company

0

50

100

150

200

250

P/E ratioMkt Cap ($ b)Revenue ($ b)Net profit margin (%)

Predictions Oracle going for acquisition of a Services company that can

provide scale – CSC is a good choice. HP & SAP forming strategic alliance – while HP lacks

middleware and Software, SAP can not really pitch against Oracle and IBM due to lack of depth in it’s offerings. So, it has choice to remain a focused player or need to forge alliance with a large Server/Storage vendor.

Dell acquiring Citrix. With EqualLogic and Compellent buys Dell is well placed in Server and storage. However Dell & Citrix would be strong alternative to EMC+Vmware, particularly in wake of it’s straining relation with EMC after Compellent buy.

Emerging Trends• Consumer Computing moving to mobile and tablets. Its is experiencing

explosive growth as never before.• Enterprise Computing moving to Cloud – Public Cloud as well as Private

Cloud.• SMEs are ahead in adopting Cloud based Software Service, while Large

Corporates prefer to have Private Cloud.• Private Cloud will experience higher growth over the Public Cloud.• Virtualization seems to be the hottest of all segments.• Storage is experiencing explosive growth driven by growth in social

networking, videos and other user driven data (10x by 2011, 44x by 2020).• Security remains elusive for most of the vendors, remains the biggest

concern for the corporates and potentially may slow down the growth of Cloud based computing.

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