1. PGSEM Final Year Project
Merger & Acquisitions by Big IT Companies
A study to identify the trend and strategy
Naveen Kumar K E (2008040)
Satyajit Paul (2008046)
Date – 19-Mar-2011
2. Project Overview
Understanding 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.
3. Selected Companies
Hewlett-Packard Cisco Systems
Oracle
Intel
IBM
Dell
Microsoft 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.
4. Taxonomy of Technology Cos
Software as Service
Platform/HW as Service
Cloud
ERP
Software Services CRM
Application Supply Chain
BI&Analytics
Security & Compliance
Middleware & Integration Content Managment
Servers, Tools & Platforms
Database
Operating System
Application Dev Software
Virtualization Proj. & Portfolio Mgmt
IT Infra Mgmt
Networking
Servers
Unified Communication
Storage Network & Nt Srvc Mgmt
Semi conductor Network Infrastructure
6. Company Analysis - ORACLE
Major Acquisitions -
PeopleSoft
Siebel
Hyperion
BEA Systems
Sun Microsystems
30000
25000 Revenue in Software business
20000
Services
growing substantially.
15000
Hardware
10000 Software With acquisition of
5000 Sun, Oracle has entered
0 Hardware segment.
2005 2006 2007 2008 2009 2010
7. Company Analysis - IBM
Major acquisitions:
Sterling Commerce
Cognos
Netezza
Divestitures:
Personal Computing
PLM Software
Most recent focus
Cloud Integration
Business Analytics
100000
90000
80000
70000
Incremental Growth in
Services
60000
Servers
Software, Middleware and
50000
40000 Storage Services
30000 Software
20000
10000
0
2005 2006 2007 2008 2009
8. Company Analysis - HP
Major Acquisitions –
EDS
3PAR
3Com, Palm Inc.
Mercury
140000
Imaging and Printing •Strong growth in Services Revenue
Group
120000
Personal Systems Group
•Consumer segment revenue
100000
80000
stagnant
60000
Services
•Drastic reduction in revenue from
40000
Storage & Servers HP Software
20000
0 •Lack in Enterprise Software
Software
2005 2006 2007 2008 2009 2010 Offerings.
9. Company Analysis – SAP
Two major acquisitions
1) Business Objects (Analytics)
2) Sybase (Mobile Solutions)
10. Company Analysis - Intel
1. Strong focus on Mobile & Security
2. Plan to compete with ARM technology for smart phone chips.
11. Company Analysis - Dell
Major acquisitions:
Perot Systems
Equal Logic
Compellent
Some recent –
Ocarina
Boomi
SecureWorks
70,000 Desktop PC
60,000
50,000
Mobility •Major decline in Desktop PC segment
40,000
Software &
•Slight increase in Laptop segment
30,000 Peripherals
20,000
10,000
Services •Average performance in other
0 Storage segments
2005 2006 2007 2008 2009 2010
12. Company Analysis - EMC
Major acquisitions
VMWare (2003)
RSA Security
Data Domain
Isilon Systems
Very strong on
storage segment.
% Share of Storage
companies adopting
VMWare for virtualization.
13. Company Analysis - Cisco
Major acquisitions
Scientific Atlanta
Webex
Navini Networks
Starent
Tandberg
50000
40000 Service Major growth noticed in Unified
30000 Other Communications (Video, Internet
20000 Advanced Technologies technology) – reaching the end
Switches
10000 user segment.
Routers
0
2005 2006 2007 2008 2009 2010
14. 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.
20,000
70,000 18,000
Windows & Windows
Entertainment and 16,000
60,000 Live Division
Devices Division 14,000
Server and Tools
50,000 Microsoft Business 12,000
Division 10,000
40,000 Online Services
Online Services Division 8,000 Division
30,000
6,000 Microsoft Business
20,000 Server and Tools Division
4,000
2,000 Entertainment and
10,000 Windows & Windows Live Devices Division
Division 0
0
2005 2006 2007 2008 2009 2010
2005 2006 2007 2008 2009 2010
21. Trends – Mega Vendors
Mega
Vendor
Smarter
Cloud Planet*
BI &
Analytics Mega
Vendor
Server/Storage
Server & Middleware
PC Co
BI &
Analytics
CRM
ERP
Database
Vendor
25. Strategic Focus Area
BI & Analytics, Integration
BI, Middleware
Mobile Apps, Database
Storage, Mobility, Services
Storage, Mobility, Services
Storage, Virtualization, Security
Collaboration/Video, Unified Computing System
Wireless, Security
Mobility, Cloud Computing
26. Strategic Direction
Mega Vendors Focused Vendors
HP and Dell seems to pursuing similar strategy. However both on services
and in mobility they would be pitching against well-established players.
27. 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.
28. 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.
29. Money Matters
Company name P/E ratio Mkt Cap ($ b) Revenue ($ b) Net profit margin (%)
Microsoft Corporation 11.47 227.37 62.48 30.02 HP & Dell are the
Intl. Business Machine... 14.24 204.79 99.87 14.85 only two companies
Oracle Corporation 25.32 170.17 65.22 22.87 where the Market
Intel Corporation 10.8 123.5 43.62 26.76 Capitalization is less
Cisco Systems, Inc. 14.28 104.48 40.04 19.40 than the revenue
SAP AG (ADR) 29.08 71.69 16.9 14.57
EMC Corporation 30.9 56.24 17.01 11.58
Dell Inc. 11.42 29.78 61.49 4.28
Hewlett-Packard Company 13.18 105.84 126.03 6.95
250
200
150
100
P/E ratio
50
Mkt Cap ($ b)
0
Revenue ($ b)
Net profit margin (%)
30. 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.
Editor's Notes
An overview of the project - 1 slideAn overview of Technology Business - Taxonomy - 1 slideBusiness Size - Data from Gartner - 1 slideCriteria used to select the companies - List of companies - 1 slideCurrent Competitive positioning of companies - 1 slideAcquisition Slides of IBM, Oracle, SAP, HP, Dell, EMC - 6/7 slidesRevenue breakup and growth - Software business players, Server & PC Business guys and Niche players - 2/3 slidesAcquisitions by Segments - 3 slidesConclusion - 3 slides---------------------------------------------Total - 22 slides
We removed few companies like Google, Apple & Amazon from the list.
In this slide, we would cover different segments in the Tech Business that are in use with various companies like Oracle or practiced by various analysts like Gartner.Some of the high growth sectors are shown in different color.
Based of their current product offerings.
Primarily a database provider. Oracle has transitioned completely into a mega vendor over 5 years due to acquisitions.ERP, CRM, BI, eCommerce, Middleware (all market leaders)With the acquisition of BEA, Oracle sought to accelerate the adoption of Java middleware technologies and Service Oriented Architecture (SOA) to enhance and extend its Fusion Middleware software.The acquisition of Sun was influential in many waysOwn Java technologies – on which a lot of technologies run.Have its own operating system Solaris – and integrate DB and SolarisCapture the server, storage business of Sun.
Ascential Software, Cast Iron and Sterling Commerce – all data integration companies. Using the combined technologies of IBM and Sterling Commerce, clients have the flexibility to manage these processes – and their networks of business partners – through public or private cloud computing environments.Lot of acquisitions in AnalyticsCognos – BI reportsCoremetrics, Unica – Web analytics – customer pref analysis, provide more relevant and targeted marketing communication on internet. Along with SI, demand generation, sales process automation, order processing and fulfillment.IBM has also strengthened its offering in networking mgmt and unified communication systems (video technology) with acquisitions of Micromuse and MRO Software.
EDS – Major services acquisition3PAR – Network storage leader – primarily viewed as HP’s urgency to strengthen its offerings in fast growing virtual data center and cloud computing markets.3Com – Purchase of network infra company – routers, switches, Palm – move to get into mobility devices and create mobile OS, appsArcSight – security solutions. For enterprise risk and compliance management.Mercury – Big acquisition in software space. But revenue figures indicated that HP didn’t take full value of acquisition.
SAP – a leader in enterprise apps segment with strong CRM, Supply chain solutions.Business Objects – Analytics tool to integrate with its software applications to analyze large amount of data to improve business performance with its reports.Follows Oracles acquisition of HyperionSybase – two purposeProvide its enterprise apps in mobileAcquire Sybase DB, removes dependence with Oracle DB
Lot of acquisitions and investments to enhance their wireless networking offeringsThe acquisition of Infineon enhanced its offerings in mobile wireless solutions and along with embedded devices acquisition of Silicon Hive, Wind River, Intel now goes head to head with ARM to create chips for smart phones. Big acquisition of McAfee – to provide security in hardware mobile.Recently came up with tablet “meebo” in collaboration with Nokia and in 2011, plans to come up with chips for smartphones. Clear strategic direction.
Major acquisitions in various segmentsPerot systems – to improve their service offeringsEqual Logic, Compellent – leader in network storage provider. With a view to provide virtualization solutions.Move into SaaS integration with acquisition of Boomi and SecureWorks
Cisco has given a lot of emphasis on is in Virtualization. Cisco has rolled out a product called Unified Computing System, which is a combination of (network + storage + server + virtualization).Tandberg, Starent Corp., WebEx, Navini Networks etc. which are very strong in video conferencing solutions, mobile based IP, internet communications, mobile WiMAX respectively.
IBM, SAP & Oracle are the top three players. Ref - http://www.gartner.com/it/page.jsp?id=1357514OutlookSoft Corporation was a Stamford, Connecticut based software company with products for business performance management including planning, consolidation, forecasting, budgeting, dashboards, predictive analytics and reporting. Along with OutlookSoft, other vendors in the performance management space include SAS, Cognos and Business Objects.SAF Simulation, Analysis and Forecasting AG, one of the global forecasting and replenishment software leaders in the retail and wholesale industries. Through the intended acquisition, SAP plans to further extend and complement its current planning, forecasting and replenishment solution portfolio for retail and wholesale companies.Netezza – Dataware house Appliance, BIOpenPages, a leading provider of software that helps companies more easily identify and manage risk and compliance activities across the enterprise through a single management system.ClaritySystems – Corporate Performance Magmt, Financial Governance.
Oracle -With Sun acquisition, Oracle is a new entrant in this space.IBM –Diligent – Data deduplicationStorwize – Data compression
Oracle -With Sun acquisition, Oracle is a new entrant in this space.IBM –
IBM -Traditionally IBM is strong player in Network Management and they have Tivoli in their portfolio.In Collaboration (or Unified Communication System), IBM has IBM Live & Lotus (notes, sametime etc)IBM’s recent acquisitions in this space are aimed at strengthening it’s position in Network Managment space further. However, with Blade acquisition, IBM will build its expertise in high-performance, low-latency Ethernet switches. HP –HP is present in Network Equipment manufacturing (Switched & Routers etc) through Procurve.HP’s offering in Netowork Management is OpenviewHP’s acquisitions are aimed at strengthening their presence Network Equipment further.Cisco –Cisco is traditionally strong player in Network Equipment Manufacturing i.e. Switches & Routers. But in recent past its under price pressure from very aggressive offerings from HP & Juniper.Recently acquisitions from Cisco are aimed at strengthening their presence in Collaboaration (Unified Collaboration System) further.
IBM traditionally has been Server, PC business, with good Db2 offering.Over years, good divestitures, good acquisitions in BI, Storage.Good partnerships with Juniper for networking and Vmware for virtualization.
Unique End-to-End Solutions EnablementAcadia—a joint venture of Cisco and EMC, along with VMware and Intel—focuses on speeding adoption of private cloud infrastructures through end-to-end enablement of service providers and large enterprise customers. they seek to virtualize their IT infrastructures and evolve to the private cloud.The Virtual Computing Environment coalition offers organizations of all sizes an accelerated approach to data center transformation with dramatic efficiencies that promise significant reductions in both capital and operating expenses.
IBM, Oracle, SAP and Microsoft are clearly heading towards mega vendors who can provide one-stop-shop.EMC, Cisco & Intel are focused players in Virtual Computing.HP and Dell seems to pursuing similar strategy. However both on services and in mobility they would be pitching against well-established players.
Every new IT trend goes through a cycle. At the end of a cycle, the industry faces an inflection point. We noticed Oracle, IBM and other focused vendors have a very clear cut strategy.However, we do notice that HP and Dell are not.
This slide is an extra slide and not for presentation.
One interesting observation here – HP & Dell are the only two comapnies where the Market Capitalization is less than the revenue.
