The year 2009 saw many tech companies, big and small, being sold, acquired or going into extinction. Most of these are / were due to the global economic crisis, diminishing demand for product, or ripple effects of a scandal, mismanagement and strategic missteps.
In the beginning of 2009, Nortel went through a slow and painful dismantling since it filed for Chapter 11 bankruptcy in January. The company began small-scale divestitures that would ultimately lead to a more significant dismantling of operations. It exited the mobile WiMAX business by ending an alliance with Alvarion (Nortel had previously targeted WiMAX as a strategic growth business for the company going forward), laid off thousands of employees, then sold its application switch business to Radware (for a mere fraction of what it had forked out in 2000 to Alteon), before winding down its investment in the Carrier Ethernet switch and router marke. Subsequently, Nortel sold its CDMA and LTE wireless businesses to Ericsson for $1.3 billion. Then in September, Avaya officially won Nortel’s enterprise business but it had to almost double its initial offer (after Verizon, which resold Nortel’s VoIP product, went to court to win assurances from Avaya that Verizon customers would not be left out to dry on service and support contracts. Avaya promised “near-term” support for those customers). Nortel’s Metro Ethernet business was then sold to Ciena in October for $769 million, while Ericsson and Kapsch acquired Nortel’s GSM wireless assets for about $103 million. With Metro Ethernet, enterprise and wireless operations sold off, and WiMAX shuttered, what is left of Nortel is essentially the Carrier VoIP and Applications Solutions group, which includes softswitches, media gateways and applications. Even these are for sale too. Extinction seems an inevitable fate for Nortel as it sails along now with whatever remains of it in maintenance mode.
In April 2009, Sun and Oracle announced a definitive agreement under which Oracle will acquire Sun. The proposed transaction is subject to Sun stockholder approval, certain regulatory approvals and customary closing conditions. Until the deal closes, each company will continue to operate independently, and it is business as usual. The deal was expected to be approved before the end of 2009. Unfortunately, to-date, it is still pending EU commission’s approval (due to concerns relating to MySQL). The latest message was Oracle’s statement on its commitment to MySQL released on December 14, 2009. The ending to this story is yet to be played out…
Barely a month later, on May 13, Oracle announced its agreement to acquire Virtual Iron Software, Inc. (Virtual Iron), a provider of server virtualization management software. Only 5 weeks after completing the acquisition of Virtual Iron, a promising virtualization start-up, Oracle goes out and kills it. To make matters worse, Oracle has done it in a very brutal way. In 11 days even existing Virtual Iron customers will not be able to buy additional licenses.
In July, NetApp lost a bidding war with EMC for the prized Data Domain. EMC will acquire Data Domain for $33.50 a share in cash. EMC had offered $2.1 billion for Data Domain in an effort to either complete a takeover or at least force NetApp to increase its bid for the third time. However, NetApp was stretching itself thin relative to EMC, which analysts estimate could have continued to bid higher for Data Domain. Instead, NetApp will get a $57 million break-up fee from Data Domain.
Then, in September, Dell announced its acquisition of Perot Systems in a transaction valued at approximately $3.9 billion. With hardware products like servers turning into a commodity form, companies like Dell are struggling to differentiate and create other revenue streams (besides being just a product company). Dell’s acquisition of Perot Systems vaults the computer maker into the market for technology services, an area it has coveted as the PC market faltered. But Dell will need to make additional deals if it hopes to mount a credible threat to IBM and Hewlett-Packard in services, according to analysts and bankers. Buying Perot Systems furnishes Dell with a technology outsourcing and services provider that will help the computer maker diversify beyond its slumping core business. Perot is strong in the health-care and government markets, areas that stand to benefit from increased spending by the Obama Administration.
The same month saw other acquisitions too. On September 14, software company Intuit bought startup Mint.com for $170 million. The next day, Adobe Systems spent $1.8 billion to buy software company Omniture. Google bought a small technology company called ReCaptcha.
In November, Hewlett-Packard announced its plans to acquire 3Com, maker of network switching and routing products. The deal is valued at US$2.7 billion, or US$7.90 per share. HP says the purchase is intended to boost its networking business, particularly in China, where 3Com has a strong presence. The 3Com deal is the most recent in a string of enterprise-related acquisitions HP has made in the past years, including most recently file serving software maker Ibrix. HP wants to be a leader in providing customers with an integrated stack of computing technology ranging from servers and storage at the foundation all the way up to services, said Chairman and CEO Mark Hurd said at a Gartner conference in October. But to be competitive these days, a company has to fully commit to each element of the stack. “You can’t be in any one of them as a hobby,” he said. “Compared to any competitor, you have to bring a combination of low cost and total cost of ownership, supported by innovation.”
What a roller coaster year it has been in 2009!
I do believe this ride is not over yet. The new 2010 is likely to see the same trend.. Hang on!
Tags: acquisition, Business, merger, strategy