The biggest deal of 2012 was CISCO’s $5 billion acquisition of NDS GROUP, a UK-headquartered company that sells the digital TV system behind Sky+ and other services.
The US network equipment maker got into the digital TV business in 2005, when it acquired set-top box maker Scientific Atlanta. Doing so has given Cisco something of a life raft in the face of dwindling switch and router revenues. Had it not been for a 30% growth in digital video sales during its last financial quarter, Cisco’s overall revenues would have shrunk.
Clearly the NDS deal was financially canny, but it was not without its risks. Just two weeks after Cisco announced the acquisition, a BBC investigation alleged that in 2002 NDS had sabotaged a rival company by leaking encryption codes online. NDS denied the claims.
It was a busy year all-round for Cisco on the acquisitions front. Other notable acquisition included Meraki, a cloud- managed Wi-Fi equipment start-up, which Cisco bought for $1.2 billion in November, and LightWire, an optical chip manufacturer.
The second-biggest deal of the year was SAP’s $4.3 billion buy-out of ARIBA in May. Besides a range of spend management software, Ariba operates a cloud-based business-to-business commerce network that allows customers to connect up their ERP systems to suppliers and partners.
According to Carter Lusher, senior analyst at Ovum, SAP’s motivation for the deal was Ariba’s experience in operating a large, cloud-based system. “This acquisition is less about Ariba’s global trading network than a ‘talent grab’ about the business issues of cloud computing and technical insights on developing applications for the cloud,” he wrote after the deal was announced.
The trend of traditional software vendors buying into the cloud, which first emerged in 2011, continued in 2012, most conspicuously with system giant ORACLE’s $1.9 billion acquisition of TALEO, a cloud-based human resources application vendor. It was the sixth- largest acquisition of the year.
Although CEO Larry Ellison was initially a critic of cloud computing, since then the company’s ambition to dominate the cloud has become apparent. Oracle said that Taleo’s talent management capabilities are “highly complementary” to its cloud-based Fusion HR applications.
Also in the human resources software space, IBM’s biggest deal of the year was its $1.3 billion takeover of US company KENEXA. The acquired company offers an unusual mix of consulting, development services and hosted software. In buying the company, IBM has arguably entered into the business applications market –something it steered clear of in recent years.
One of the biggest spenders of the year was memory chip manufacturer MICRON. In February, the US-headquartered company bought out INTEL’s share of a joint venture focusing on NAND flash chips. NAND memory is used in portable devices such as smartphones, and the move can be seen as a reaction by the company to dwindling sales of PCs, which use DRAM memory.
However, Micron also bolstered its position in the DRAM memory chip market in July by acquiring Japanese firm ELPIDA MEMORY for $2.5 billion. Elpida had filed for bankruptcy protection in February. These deals have so far failed to resolve Micron’s issues, however. In its most recent financial quarter, the company’s sales dropped 12% to $1.8 billion and it made a net loss of $275 million.
One of the busiest acquirers during 2012 was DELL, the hardware manufacturer that is trying to build an end-to-end IT systems business before its PC revenues evaporate entirely. Dell’s biggest deal saw it acquire systems management tool vendor QUEST SOFTWARE for $2.4 billion, after a bidding war with a private equity firm. It was seen as a good move for the Texan company, with one analyst describing the fit as “obvious to the point of absurdity”.
Among Dell’s many other acquisitions during the year were network security vendor SONICWALL (for a rumoured $1.2 billion) and thin client vendor WYSE (a deal said to be worth anything between $400 million and $1 billion).
Dell’s acquisition strategy has yet to stem the decline in PC sales, however. Its most recent quarter saw revenues drop 11% year- on-year to $13.7 billion.
UK companies featured in many of the largest deals of the year – but not always in ways that benefited the UK IT industry. In May, Anglo-Dutch IT services company LOGICAagreed to be acquired by Canadian provider CGI– a company roughly half its size – for £1.7 billion.
Logica had clearly been in financial trouble: in December 2011 it had announced 1,300 job cuts. Still, many lamented the demise of one of the few remaining London-listed IT companies.
The same went for banking software company MISYS, which was taken over by US private equity firm VISTA EQUITY PARTNERS in March for £1.3 billion.
There was slight recompense for that, however, in June, when UK mobile banking software company MONETISE bought its US-based rival CLAIRMAIL for $173 million, proving that ownership does not necessarily have to move East to West.
One mega-deal between UK companies was mobile telecommunications provider VODAFONE’s £1 billion acquisition of CABLE&WIRELESS WORLDWIDE. With its roots in the communications networks of the British empire, Cable&Wireless Worldwide operates 20,000km of cabling in the UK and 400,000km around the world. However, its revenues were in decline before the deal.
Vodafone said that it would use the acquired company’s infrastructure to support its voice and data networks. Looking ahead to 2013, there will doubtless be more takeovers of British companies. In early January, accounting firm BDO predicted that the UK’s technology sector will see just as much M&A activity in 2013 as in 2012, if not more.