Deal Report Cards

Score=85% ShoreTel Acquires Agito Networks

Tue, 26 Oct 2010 14:19:57 +0100

The ShoreTel hurricane (the fancy S looks like a hurricane to me) acquired Agito Networks for $11.4 million. Announced on Thursday October 21, 2010, the deal has only recently gained some traction in the trades. This is the second acquisition between two companies that we've reviewed in mobile UC (the other being Nortel and Avaya) and reflects a movement towards continuing consolidation in the IT sector as companies with cash contemplate their growth plan for the economic recovery and post-reco...

Score=80% Intel acquires Mobile Division of Infineon

Mon, 30 Aug 2010 16:41:44 +0100

Intel has been absent from the cellphone business since it sold its wireless electronics unit to Marvell for $600 million in 2006, when it discovered that its cellphone product lines were found wanting and would be a drain on earnings for the foreseeable future. A lot has transpired since that time four years ago. Intel, where the strategists are sensing a market inflection based on the economy lifecycle stage - fragile recovery - has agreed to acquire the mobile phone assets of Infineon (the si...

Score=30% Intel Acquires McAfee

Fri, 20 Aug 2010 18:33:09 +0100

Intel announced yesterday, it's agreement for a $7.7 billion cash acquisition of the security software firm McAfee. I've taken a few liberties on scoring this deal, positioning the 60% premium over stock price as a combination - McIntel - (pronunciation tip - think McIntosh...). There may be a stronger 'strategic fit' for Intel to buy GM's upcoming IPO so they could make sure Intel chips are built into GM cars. Overall, this is a bad deal for Intel shareholders. It signals a move for the compa...

Share-Buybacks Increase

Mon, 02 Aug 2010 13:25:20 +0100

In previous blog posts, we have shown how economic recoveries are a great time to be buying up competitors to strengthen the firm's competitiveness once the recovery begins. Q. But what should a company do if they're already too big to buy up meaningful competitors or if competitors are bigger, and they are generating tons of cash from existing operations? A. Share buybacks, and they're on the rise. Here's a simple table explaining the mechanics involved. Feature Before Buyback After B...

Deal Scores To-Date

Sat, 03 Jul 2010 04:22:46 +0100

Here's a tally of the Deal Scores we've published these past four years together with a summary of observations. The outliers with the lowest scores: 5% score - Cisco and Pure Digital - buying a consumer electronics business was and is a bad idea for an enterprise equipment company. 20% score - Microsoft and TellMe - buying a hosted voice recognition company didn't seem to fit into the Microsoft core competency. 25% score - Cisco again, this time acquiring PostPath an email server competit...

Score=70% - IBM buys BigFix

Thu, 01 Jul 2010 14:57:33 +0100

IBM announced July 1, 2010 their plan to acquire BigFix, a privately-owned provider of IT operations and security policy enforcement (patches, power management) infrastructure management software that enables the management of laptops, desktops and servers. The 200-or-so employees will become part of the Tivoli management software unit, once the deal is approved by regulatory agencies. This is another in a series of IBM acquisitions targeting software companies. A sound strategy, particularly as...

Nortel Chapter 11 Update - June 22, 2010

Wed, 30 Jun 2010 20:05:31 +0100

Nortel, despite its selloff of the operating divisions to Ciena, Avaya, Ericsson and Genband is still struggling with making its disbursement plan (sub. required) deadlines set by the Bankruptcy Court, according to the Wall Street Journal. The latest word is that the company wants to end health care and life insurance benefits for 4,000 US retirees and their dependents and cut off long-term disability payments to another 280, generating savings of $1 million/month. In the US, Nortel's health car...

Score=85% HP Acquires Palm

Thu, 29 Apr 2010 13:02:23 +0100

HP Picks up Palm HP announced a definitive all-cash agreement to acquire Palm for $1.2 billion. The iconic smartphone developer had been languishing lately despite well-respected products, lacking the caché and sizzle associated with more interesting products from Apple and Google (who may be hurting in its own right) and with stronger carriers than Sprint. The combined market share for both HP and Palm would remain less than 5%, but at the very least gives HP a platform to build on, where i...

Companies With Fistfuls of Cash

Thu, 04 Mar 2010 22:14:46 +0100

To quote the headline in today's Wall Street Journal, (subscription may be required), With Fistfuls of Cash, Firms on the Hunt, it seems that we really are near the end of the recession, since this is the best time to CEOs to prepare their businesses for the post-recession recovery (that may be in swing as we speak). It's when coffers are fullest, weak companies are weakest and when stock prices are undervalued so buying assets to kickstart an investor rush into your stock may be a sound strategy...

Cisco Reaches Deep To Pay $300 million More For TANDBERG

Sat, 28 Nov 2009 01:51:51 +0100

I did correctly predict that Cisco would reach deeper into its pocketbook and pull out more money to pay for TANDBERG, which they most certainly did. It is a huge embarrassment for Cisco to have gotten only 9% of shares in its original offer, showing that the brand does not offer the kind of cachet they used to. To me, it would have been a sign of Cisco's strategic maturity if it had walked away from a deal it really did consider to be too rich. Nortel did just that with its acquisition of Sels...

Score=90% HP Acquires 3Com

Thu, 12 Nov 2009 16:11:19 +0100

HP announced Nov 11, 2009 that 3Com and HP had signed a definitive agreement for HP to acquire 3Com for $2.7 billion in cash. The deal is expected to close in first half of 2010. Ever since Cisco's foray into the heart of HP's server computing business - the data center computer - HP and its alliance (with Cisco)'s days have been numbered. You might recall that HP already has a networking business with stackable and simple modular switching products and includes the Colubris WiFi unit acquired i...

Score=75% Logitech Acquires LifeSize

Wed, 11 Nov 2009 16:08:30 +0100

As consolidation gains momentum in the enterprise communications industry, Logitech, the web camera PC peripherals company, and operator of PC video service SightSpeed, announced that they've acquired LifeSize Communications for $405 million, a 5x payout for investors. Here's the company's fact sheet on the announcement, which shows that Logitech is a publicly traded Swiss-HQ'd company with over $2 billion sales and 8,000 employees around the world. LifeSize has never before reported their financ...

Cisco Hangs Tough on TANDBERG Shareholders?

Mon, 02 Nov 2009 16:52:44 +0100

On October 1, 2009 Cisco announced a $3 billion bid to acquire TANDBERG, the leading vendor of telepresence and video conferencing equipment. The offer is only an 11% premium over the publicly traded stock price before the announcement, and although recommended by the TANDBERG board of directors, the Norwegian institutional shareholders of TANDBERG, representing 24% of the outstanding shares have rejected the Cisco offer to acquiring all the outstanding shares for $3 billion. This complicates C...

Score=70% - Cisco Acquires TANDBERG

Thu, 01 Oct 2009 15:08:30 +0100

Cisco agrees to buy TANDBERG, the Norwegian video communications equipment market leader, paying $3 billion, an 11% premium to yesterday's Oslo market close for the stock. Expected to close in first half 2010, the deal will result in a video communications juggernaut being led by Fredrik Halvorsen, CEO of TANDBERG. A lot of analysis in the coming months will carp about the product overlaps, but will likely miss the strategic jewel at the heart of this acquisition - channel. You can quite reasona...

Score=65% Avaya Buys Nortel Enterprise

Mon, 14 Sep 2009 20:39:59 +0100

Well, despite the last minute nail-biting, it's official. Avaya won the auction for Nortel Enterprise with a $900 million bid. What a cliff-hanger. The IRS sued for $3 billion in back taxes (this can't be a credible lawsuit can it?), and a few days before the final auction date, Verizon sued that its contracts with Nortel were too important to national security to allow the winning bidder to reject them. Could you make this stuff up? This sure sounds like a 200x version of "Dallas" coming your wa...

An Open Letter to Potential Bidders for Nortel Enterprise

Mon, 10 Aug 2009 11:57:12 +0100

Dear Kevin (Kennedy of Avaya), James (O'Neill of Siemens), Steve (Ballmer of Microsoft), John (Chambers of Cisco) and any other bidders: I'm writing to you today to help you shape your company's bidding strategy for Nortel Enterprise. My experience in these sorts of things comes from two major sources - I have worked there and I have studied successful M&A. As I understand the rules of the bidding process to be supervised by the bankruptcy court and conducted at the New York offices of Cleary G...

TANDBERG and SilverLake Partners?

Wed, 29 Jul 2009 12:12:59 +0100

I was shocked the other day to learn about SilverLake Partners' renewed interest in taking TANDBERG, the video communications endpoint manufacturer, private. This story first came up in the summer of 2008 but died away as it became clear that there may not be inexpensive debt available as the financial services sector fell into disarray in the 3rd and 4th quarters of 2008. This project doesn't make any sense to me. Usually Private Equity companies pick up tarnished brands with customers and prod...

Score=90%: Ericsson - Nortel CDMA

Mon, 27 Jul 2009 12:30:02 +0100

Now that's how you hold a bankruptcy court supervised auction. Package up the business, get a stalking horse bid (Nokia Siemens Networks bid $0.65 billion last month) and then supervise bidding that doubles the stalking horse bid. Ericsson picks up major market share in the North American wireless market (Nortel CDMA customers include Verizon Wireless (Nortel's largest customer), Sprint, Bell Mobility and Telus in Canada), a market that they avoided by not having any CDMA solutions. BTW, Alcatel...

Avaya-Nortel - Only $475 million?

Fri, 24 Jul 2009 16:23:07 +0100

Earlier this week, Nortel announced and Avaya announced that the Nortel Enterprise unit would be sold to Avaya for $475 million, roughly $0.50 per dollar of revenue. Of course, this generated a storm of analyst comments, most of which applauded the idea of industry consolidation and many of whom thanked the gods for an end to the Nortel saga. I've written about IPT consolidation in the past (Nor-vaya, Now is the Time, Siemens, Astraa Ericsson, Mitel-Intertel), but argue for it for very different...

PE Firm Assembles Advisors, But...

Thu, 16 Jul 2009 18:13:59 +0100

Probably one of the longest and drawn out processes I've been watching over the past decade is the über-painful Nortel bankruptcy proceedings. It's hard to believe the company entered Chapter 11 on January 15, 2009 some 183 days ago. Whew. How the shenanigans of the process have protected bondholders is not entirely clear to me. I suppose entering chapter 11 with all of the bondholder's cash in your accounts really helped the management team (if you can call Mike Z. that) have some backbone in ...