Tech industry's biggest M&A deals of 2008
- 13 December, 2008 22:00
The top 15 mergers and acquisition deals in the network industry for 2008 were worth nearly US$65 billion, and companies involved ran the gamut from those specializing in IT services to network routers to wireless and security. Carriers such as AT&T, Verizon Wireless and CenturyTel were among the biggest spenders. Given the practically nonexistent tech IPO market, buyouts proved to be a popular exit strategy for many this year. We've consolidated 60-plus tech M&A deals (and counting) from this year in our ongoing slideshow. Note that in many deals, the vendors don't publicly say how much they're forking over for their prize acquisitions, but here, we'll recap the top 15 based on publicly disclosed transaction values:
1. Verizon Wireless-Alltel: $28.1 billion (includes $22.2 billion in debt)
Apparently tired of being the second-largest U.S. wireless carrier, Verizon Wireless is vaulting past AT&T via this buyout of the nation's fifth-largest wireless carrier. After adding Alltel's 13 million customers to its ranks, Verizon will have the most subscribers in the United States, with around 80 million. AT&T, which has mostly held the lead for total wireless subscribers since merging with Cingular in 2004, had an estimated 71 million subscribers at the time the deal was announced in June. As is frequently the case with big carrier deals, the Department of Justice requested that Verizon shed some assets in the name of fair competition. The Federal Trade Commission gave its blessing to the deal in December.
2. HP-EDS: $13.9 billion
HP boasted in May when it announced the deal that it would double the company's services revenue and put it into the No. 2 spot in the IT business services market behind IBM. More recently, HP detailed massive job cuts -- 24,600 of them -- and outlined its integration plans, including transferring HP services into EDS. Some worry that HP might keep its product and services businesses too close to one anther for customers' comfort. According to the company's latest financial announcement, "HP Services (HPS) revenue increased 99% to $8.6 billion, led by $3.9 billion revenue resulting from the EDS acquisition." Apart from that buy, HPS revenue grew by 10% in 2008 over the previous year.
3. Oracle-BEA: $8.5 billion
BEA stared down Oracle and got a better deal in January than the original $6.7 billion offer from a few months earlier. Some said at the outset that IBM might also be a winner from this deal by exploiting fear, uncertainty and doubt surrounding the middleware vendor's integration into Oracle. In July, Oracle spelled out its BEA product strategy: All BEA products will continue under existing support timelines, with "no forced migration at all," Oracle CEO Charles Phillips said at the time.
But moving forward, the combined company's middleware and infrastructure catalog will be broken into three categories: strategic; "continue and converge" and "maintenance," said Thomas Kurian, senior vice president, Oracle Fusion Middleware. Oracle also specified that BEA WebLogic Server will be Oracle's lead apps server, even though Oracle will continue to work on its own.
4. CenturyTel-Embarq: $5.8 billion
CenturyTel, a local exchange carrier and ISP that is based in Louisiana and that operates in 25 states, says merging with Embarq will give it a combined total of 8 million access lines, 2 million broadband subscribers and roughly 400,000 video subscribers. Additionally, the newly merged company would expand its reach to a total of 33 states, CenturyTel says. Not familiar with Embarq? You might know its ex-CEO: the ubiquitous Sprint CEO Dan Hesse.
5. Brocade-Foundry: $2.6 billion
Were still waiting for the i's to be dotted and t's to be crossed on this deal, initially announced in July. The value of the deal was downgraded from $3 billion to $2.6 billion in October, Brocade secured a loan in October to make the deal, and in November Foundry let pass a deadline by which it could have looked for better offers. The combination of Brocade and Foundry is seen as a direct effort to combat Cisco with a broader data center product collection, exploiting Brocade's strength in storage networking and Foundry's powerful routers.
6. Microsoft-Fast Search and Transfer (FAST): $1.2 billion
Microsoft, suggesting that enterprise search has hit a tipping point, announced plans in January to gobble up this Norwegian company. Microsoft's efforts to play catch-up with Google also included a mid-summer buyout of search engine company Powerset for an undisclosed sum. Unfortunately for Microsoft, the FAST deal hasn't been entirely smooth, as the Oslo-based outfit was charged with accounting fraud in November by Norwegian police.
7. Sun-MySQL: $1 billion
The deal gives Sun a stronghold in the open source software market, though also pits the company even more directly vs. big companies such as Oracle, IBM and Microsoft. Sun foresees big opportunities for database sales into those building Web-based businesses. Sun CEO Jonathan Schwartz also said that MySQL's rapid growth rate was nothing to sneeze at.
Not surprisingly, the buyout has created something of a shakeup at MySQL, which has seen its founders leaving or thinking about it. But MySQL faithful say they're generally optimistic about what Sun might bring to the table, and in fact, Sun has announced several MySQL product upgrades since the deal closed in February.
8. AT&T-Centennial Communications: $944 million
AT&T followed up its announced buyout of Wi-Fi specialist Wayport with the even bigger dollar acquisition of wireless service provider Centennial later that week in early November. In purchasing Centennial, a regional provider of wireless communications services, AT&T says it will improve its wireless coverage in several rural areas in both the continental United States and in Puerto Rico.
9. Symantec-MessageLabs: $695 million
For Symantec, the acquisition gives it an alternative e-mail security offering to BrightMail, the company's antispam and antivirus appliance. MessageLabs offers a hosted spam and Web traffic filtering service. Blogger Richard Stiennon responded to the deal (along with the McAfee-Secure Computing transaction) with surprise given the high valuations of the acquired companies.
10. Gores/Siemens-Enterasys: $550 million
This one's a little tricky. Enterasys will be combined with Siemens' Enterprise Communications group, of which a controlling interest was acquired by The Gores Group, the private equity firm that owns Enterasys Gores will also include its SER Solutions call center software company in the joint venture. The result will be a $5 billion firm with more than 1 million customers, 15,000 employees and a presence in 80 countries, according to a fact sheet on the Siemens Enterprise Communications site. Gores will own a 51% stake in the joint venture while Siemens retains 49% ownership. Sadly, the CEO of Enterasys died not long after the deal was made.
11. McAfee-Secure Computing: $465 million
The September deal was touted as combining Secure Computing's strengths in firewall, Web and e-mail gateway filtering with McAfee's intrusion prevention, desktop encryption, data-leak prevention, antimalware, regulatory compliance and centralized management McAfee CEO Dave DeWalt said at the time that the move is part of McAfee's efforts to offer a broader suite of products. McAfee earlier this year announced the purchase of data protection appliance and software maker Reconnex.
12. HP-LeftHand Networks: $360 million
HP said in November it would buy LeftHand to fill in its storage virtualization and iSCSI lines with products for midsize companies and remote offices and branches. The Boulder, Colo., company was an early developer of SANs built around iSCSI. It sells software that runs on existing storage and industry-standard server platforms.
13. Sophos-Utimaco: $314 million
With the acquisition, antivirus expert Sophos gets a sizeable foothold in the endpoint data protection market, where it will compete with McAfee and CheckPoint Software. Utimaco is dominant in Germany and Western Europe, selling mainly to the type of large-enterprise customers that Sophos covets, said Sophos CEO Steve Mumford. Last year, Sophos bought its way into the network access control market via its Endforce buyout.
14. Ciena-World Wide Packets: $290 million
The carrier Ethernet market has been a swirl of activity this year, with anyone who is anyone announcing new products. Ciena attempted to solidify its position by snapping up privately held World Wide Packets, which makes switches and routers for Ethernet service providers. Still on the block in this market: Nortel's metro Ethernet business.
15. AT&T-Wayport: $275 million
Wayport specializes in providing wireless-network management for several big companies, including Four Seasons hotels and McDonald's restaurants. By acquiring Wayport, AT&T will expand its Wi-Fi footprint to roughly 20,000 locations in the United States and more than 80,000 locations around the world. AT&T customers will have access to all the newly added Wi-Fi hot spots, the company says, and will be able to connect for free using their AT&T-enabled smartphones and laptops. Some industry observers say AT&T's move to treat Wi-Fi strategically is shrewd, whereas other carriers seem threatened by Wi-Fi.
One more for good measure:
Cisco-Nuova: $678 million?
We weren't quite sure what to do with the Cisco-Nuova deal announced in April. It's complicated in that Cisco already owned 80% of the switch maker. The reason we say it's difficult to judge the value of this transaction is that Cisco says the maximum potential payout for Nuova could reach $678 million based on the revenue of Nuova products over three measurement periods. The first measurement period will be early in Cisco's fiscal year 2010, the second measurement in late fiscal year 2010, and the third in mid fiscal year 2011. Nuova is behind Cisco's Nexus 5000 data center switch.
IDG News Service contributed to this report.