With the combined technologies, Peoplefluent will be able to deliver powerful enterprise collaboration capabilities and a broad new spectrum of employee engagement initiatives to its customers. Socialtext now has access to Peoplefluent’s more than 5,000 enterprise customers and 80 of the Fortune 100 companies. In addition, Socialtext will work with Peoplefluent to inject social capabilities into Peoplefluent’s Human Capital / Talent Management product line.

With deployment of Socialtext technology within the Peoplefluent business, Peoplefluent will provide its customers with a standalone social platform and will also deliver every product within its existing suite optimized with embedded and integrated social capabilities. Socialtext remains an independent entity focused on providing enterprise social software and its team will continue to serve and expand its customer base under the current company brand.

About Peoplefluent
Peoplefluent is transforming Talent Management through best-of-breed technology and expertise. With a deep focus on business intelligence and analytics, the Company’s social, mobile and cloud-based technology gives clients the actionable insight required to make strategic decisions that drive better business results. Nearly 80 percent of the Fortune 100 use Peoplefluent Talent Management, Vendor Management and Workforce Compliance and Diversity solutions to manage salaried, hourly and contingent labor across their organization. These solutions manage the entire talent lifecycle from recruiting to onboarding and through the ongoing management of each person’s career while helping organizations measure, analyze and empower their existing workforce. The Company’s solutions currently support more than 5,100 organizations ranging in size from large, global corporations to small and medium-sized businesses, and it is used by more than 5 million users in 214 countries and territories around the world.

About Socialtext
Established in 2002, Socialtext was the first company to deliver social software to businesses. By unlocking knowledge, expertise, ideas and data, Socialtext eliminates information silos across the enterprise to drive superior business performance. Socialtext’s enterprise social networking products — including microblogging, blogs, wikis, profiles and social spreadsheets — provide simpler ways for employees to share vital information and work together in real-time. Delivered in a variety of hosted cloud services, as well as on-site appliances, enterprise customers are provided with flexible deployment options that meet their security requirements. Built on a flexible, web-oriented architecture, Socialtext integrates with virtually any traditional system of record, such as CRM and ERP, enabling companies to discuss, collaborate, and take action on key business processes. More than 6,500 businesses worldwide have accelerated their business performance with Socialtext, including Egon Zehnder, Getty Images, Symantec, Meredith Corporation, NYU Stern, OSIsoft, and Epitaph Records. To learn more, visit www.socialtext.com.

About Woodside Capital Partners
Woodside Capital Partners is a global, independent investment bank that delivers world-class strategic and financial advice to emerging growth companies in the technology and life sciences sectors. With a strong track record in M&A, strategic partnerships and private placements, Woodside Capital Partners has been providing worldwide investment banking services since 2001. Woodside Capital Partners has offices in Silicon Valley and London, and leading domain experience in software, Internet services, electronic communications and materials, and life sciences. WCP Research offers institutional technology research services to buy-side institutional investors and technology industry executives. The team of Woodside Capital Partners has completed transactions totaling more than $10 billion. Securities offered through Woodside Capital Securities LLC, member FINRA/SIPC. For more information, please visit woodsidecap.com.

# # #
Press Release Contact:
Kelly Porter
Woodside Capital Partners International LLC
(650) 391-2075

Electronics Banking Research Report – May 2012

Today, Human Genome Sciences (HGSI) rejected an unsolicited hostile takeover offer by GlaxoSmithKline (GSK) even though it carried an 81% premium. In fact, the market is now betting on an even better offer demonstrated by HGSI closing up 98% for the day – a cool $1.4B in newly minted dollars.

This offer by GSK is highly significant for four reasons:

1. It highlights that even a $1.4B market cap biotech company like HGSI can be undervalued by 100% or more by the public markets;

2. That a structured M&A process, the one Goldman Sachs will now conduct for HGSI, should well result in an even higher premium;

3. The pressure for revenue growth, earnings, and pipeline to offset patent cliffs is so great that big pharma is turning to “hostile” offers of their best longtime collaboration partners no less; and lastly

4. Pharma is once again beginning to assign economic value to developmental stage drugs that are currently ignored in company valuations.

The message to our sub-$300M clients is this: don’t give up hope that your pipelines will forever be valued at virtually zero by financial analysts. M&A activity has a way of lifting all boats and strategic partnerships and M&A activity have nowhere to go but up. Big pharma needs to use its high cash levels to fill both its pipeline and its sales bag. And smaller companies may once again have the luxury of focusing on innovation instead of perennial expense cutting and capital raising. While recessions destroy, economic recoveries revitalize. We think this inflection point will have legs, even if they don’t want to run very fast!

Regards,
Jeff

LSF Network, Inc. was represented in this transaction by Newforth Partners, recently merged into Woodside Capital Partners LLC, global, independent investment bank headquartered in Palo Alto, CA. Terms of the deal were not released.

About LSF Network, Inc.
LSF Network, parent of LSF Interactive, is an online marketing and media buying agency that uses results-driven digital marketing solutions, tools and services to lead brands to dominate their industries and generate more revenue per campaign. Headquartered in San Francisco, the 110-people strong LSF Network Group has offices on two continents and manages campaigns for a roster of direct accounts worldwide that include ClubMed, Waterford Wedgewood, Royal Doulton, Career Education Corporation, LSI, Aramark Refreshment Services, Unigroup, Kelly Services, Target, LastMinuteTravel.com, Le Figaro, France24 and several more. For more information, please visit http://www.lsfinteractive.com and http://www.lsfnetwork.com.

About Geary Group, Inc.
Geary Group is a digital holding company providing next generation digital marketing services and operating under three divisions: Geary Interactive, Geary PMG and Geary SEO. As one of the nation’s foremost independent digital agencies, Geary Group acts as digital Agency of Record and manages campaigns for a roster of ROI-focused companies including WD-40, Bumble Bee Foods, MobiTV, Covad Communications (now Megapath) and Kyocera amongst several others. The agency is regularly recognized as one of the San Diego area’s fastest-growing private companies and best places to work. Geary is headquartered in San Diego with an office in San Francisco. For additional information, please visit http://www.gearygroup.com.

About Woodside Capital
Woodside Capital Partners is a global, independent investment bank that delivers world-class strategic and financial advice to emerging growth companies in the technology and life sciences sectors. Backed with its global network, strategic partnerships, private placements and strong track record in M&A, Woodside Capital Partners has been providing worldwide investment banking services since 2001. With offices in Silicon Valley and London, the leadership team has extensive domain experience in software, Internet services, electronic communications and materials, and life sciences. WCP Research offers institutional technology research services to buy-side institutional investors and technology industry executives. The team of Woodside Capital Partners has completed transactions totaling more than $10 billion. For more information, visit woodsidecap.com.

# # #
Press Release Contact:
Tricia Salinero
Woodside Capital Partners International LLC
(650) 391-2075

WCP Software Banking Research Report

2012 WCP LED Lighting Report

San Francisco Business Times

January 27, 2012, Palo Alto, CA: 

Palo Alto-based mid-market investment bank Woodside Capital Partners has added nine employees since the beginning of the year, doubling the size of its software and Internet team and, for the first time, adding a five-person technology research team to its staff.

The firm, which advises companies in transactions generally $100 million and smaller, said record cash amassed by large corporate acquirers and a pool of talent defecting from larger banks has prompted its expansion.

Woodside now has 25 employees, expects to hire at least five more in coming months and is considering opening an office in Japan this year in addition to expanding its London office.

Since the beginning of the year, Woodside acquired M&A advisers Tricia Salinero, Ron Heller, and Kirk Bloede along with transaction analyst Shad Mohammadi, from Newforth Partners, also from Silicon Valley. And Woodside also added analysts Sam Skinner, Edgar Bierdeman, Marshall Senk, Ryan Koontz and Sean Blakley, a team that built a technology research practice at Inflection Point Research starting in 2004.

“The large Wall Street banks have been laying people off in droves, and we’re able to cherry pick some of the best,” said Rudy Burger, managing partner at Woodside Capital Partners. Woodside focuses on three broad sectors: electronics, software and Internet and life sciences, which includes medical devices.

In the latest venture capital data on 2011 released by Dow Jones and Ernst & Young, information technology — which includes software and Internet services — was the largest investment sector in the Bay Area in 2011, raising $3.6 billion.

That represents a 5 percent increase in money raised by IT companies compared with 2010. In 2011, the software sub-sector jumped 20 percent while the medical device sector was up 33 percent, accounting for more than half of the dollars invested in the health care sector. Jeff Grabow, West venture capital leader for Ernst & Young, which tracks venture capital data, said given the data, it makes sense that bankers would expand in those areas.

“These companies are getting venture backed and are going to need a liquidity mechanism and they’re going to need bankers for that,” said Grabow.

Here is a link to the San Francisco Business Times article by Lindsay Riddell

lriddell@bizjournals.com / (415) 288-4968

About Huawei:
Huawei is a leading global information and communications technology (ICT) solutions provider. Through our dedication to customer-centric innovation and strong partnerships, we have established end-to-end advantages in telecom networks, devices and cloud computing. We are committed to creating maximum value for telecom operators, enterprises and consumers by providing competitive solutions and services. Our products and solutions have been deployed in over 140 countries, serving more than one third of the world’s population.   For more information visit www.huawei.com.

About CIP Technologies:
CIP Technologies is the trading name of The Centre for Integrated Photonics Ltd, a world-renowned developer of advanced photonic hybrid integrated circuits and InP-based opto-electronic modules for the communications and renewable energy markets. With integrated state-of-the-art research facilities, as well as strategic partnerships with volume packaging providers, CIP Technologies develops the photonic products of tomorrow. CIP Technologies’ uniquely broad range of competencies is based on world-renowned research, and includes network architecture design and analysis. For more information visit www.ciphotonics.com

About Woodside Capital:
Woodside Capital Partners delivers value-added M&A advisory services for emerging growth companies. Securities transactions are offered through Woodside Capital Securities LLC, a registered broker-dealer and member of FINRA (www.finra.org) and SIPC (www.sipc.org), and through Woodside Capital Partners UK LLP, a financial services firm authorized and regulated by the FSA (www.fsa.gov.uk).   Woodside Capital Partners International LLC, Woodside Capital Securities LLC, and Woodside Capital Partners UK LLP are affiliated companies. For more information visit woodsidecap.com.

# # #

Press Contact:
Woodside Capital Partners International, LLC
Rudy Burger, PhD, Managing Partner
rudy.burger@woodsidecap.com
+1.650.391.2075

Salinero is a top investment banker in Silicon Valley, having completed over 60 technology mergers and acquisitions valued at nearly $4 billion over a successful 20 year career in software and technology. In addition to other experience, Salinero spent seven years at Broadview International, a global M&A advisor for IT, communications, healthcare technology and media companies.

Heller has been a successful investment banker for 20 years, the last 15 focused on M&A and private placements for technology companies. Heller was previously with the Equity Private Placements Group of Credit Suisse First Boston’s Technology Group.

Bloede was previously a Senior Vice President at Silicon Valley Bank where he was a core team member in forming its investment banking division. Prior to Silicon Valley Bank, Bloede was a Vice President at Lighthouse Capital Partners.

Salinero will moderate a panel at today’s Woodside Capital’s Better Acquisition Gathering 2012, a gathering of Corporate Development executives, Venture Capitalists, and CEOs from companies across the software and internet sectors.

Salinero notes, “From my perspective, this is a great opportunity for us to create a best-in-class firm aimed at the mid-market. We are joining a great transaction team with the added dimensions of an institutional research team and a global footprint.”

Rudy Burger, Woodside Capital’s Managing Partner echoed the sentiment, adding “We are pleased to have doubled the size of our software practice and brought on senior talent with extensive M&A and private placements expertise. Tricia and I have known each other for almost 20 years and are finally glad to have the opportunity to bring our two teams together.”

Salinero, Heller, Bloede and Mohammadi were previously with Newforth Partners LLC, a leading technology investment bank in Silicon Valley.

About Woodside Capital

Woodside Capital delivers value-added M&A and private placement advisory services for emerging growth companies. Securities transactions are offered through Woodside Capital Securities LLC, a registered broker-dealer and member of FINRA (www.finra.org) and SIPC (www.sipc.org), and through Woodside Capital Partners UK LLP, a financial services firm authorized and regulated by the FSA (www.fsa.gov.uk). Woodside Capital Partners International LLC, Woodside Capital Securities LLC, and Woodside Capital Partners UK LLP are affiliated companies. More information is available at woodsidecap.com or by calling 1.650.391.2075

# # #

Press Release Contact:
Rudy Burger
Woodside Capital Partners International LLC
(650) 391-2075

Palo Alto, CA – January 10, 2012 – Woodside Capital Partners, a global technology investment bank, is pleased to announce that it is hosting the 2012 Better Acquisitions Gathering, an annual summit of the top acquirers, venture capitalists, CEOs, and select other senior executives in software and internet services. The Gathering will be held January 18 and 19 under the 16th-century ceiling in the ballroom of Stonebrook Court Estate in Los Altos Hills, and is co-sponsored by Deloitte and Fenwick & West.

The Gathering brings together 100 high-level participants, including top corporate development executives from Alibaba, Adobe Systems, BMC Software, CA Technologies, Cisco Systems, Citrix, eBay, EchoStar, Electronic Arts, Facebook, Google, IAC Interactive, IBM Corporation, News Corporation, Salesforce.com, SAP, TIBCO, Twitter, Tencent, Yahoo! and Zynga, among others. Key venture capitalists from top firms and emerging growth CEOs will also be in attendance.

Dialogue at this exclusive annual event focuses on acquisitions as seen from both sides of the transaction, and on emerging trends in technology and society and how they affect the $219 billion tech M&A market. Attendees discuss how acquisitions are a critical growth strategy for software and internet companies, and how acquisitions can be carried-out more effectively to benefit all participants in the technology eco-system-acquirers, entrepreneurs and investors alike. Panels surround acquisition strategy, execution, integration, acquirers’ reflections on 2011 and plans for 2012.

For information about the Better Acquisitions Gathering, please contact Coral Soutar at coral.soutar@woodsidecap.com.

Here is a link to the deck

###
Press Contact:

Woodside Capital Partners International, LLC
Kelly Porter, Managing Director
Kelly.porter@woodsidecap.com
+1.650.814.4794

Woodside Capital Partners delivers institutional technology research services and value-added M&A advisory services for emerging growth companies. Securities transactions are offered through Woodside Capital Securities LLC, a registered broker-dealer and member of FINRA (www.finra.org) and SIPC (www.sipc.org), and through Woodside Capital Partners UK LLP, a financial services firm authorized and regulated by the FSA (www.fsa.gov.uk). Woodside Capital Partners International LLC, Woodside Capital Securities LLC, and Woodside Capital Partners UK LLP are affiliated companies.

Palo Alto, CA. January, 9, 2012. Woodside Capital Partners, a global technology investment bank is pleased to announce the launch of its technology research group serving buyside institutional investors and industry executives. WCP Research will initially focus on two key strategic themes in technology investing – “cloud and enterprise software” and “network infrastructure and services.”

The team of research and industry veterans includes Sam Skinner, Edgar Bierdeman, Marshall Senk, Ryan Koontz and Sean Blakley. All are joining Woodside from Inflection Point Research where they established and built a successful technology research practice from 2004 until 2011. The team has extensive experience across both the technology and financial industries including: Oracle Corporation, Siebel Systems, Quest Software, AT&T, Tellabs, Advanced Fibre Communications, Hewlett Packard, Robertson Stephens, Hambrecht & Quist, Drexel Burnham, Dakin Securities and Moors & Cabot.

“We are very excited to be launching this new area of our business,” said Rudy Burger, Managing Partner, Woodside Capital. “With all of the structural change that has happened with institutional research in the past several years, we believe the time is right to launch this service. We believe that not only will we be able to offer a superior product to technology investors but also enhance the strategic value we can offer our M&A advisory clients.”

The group’s techView™ research product is comprised of daily research abstracts and direct “deep dive” discussions with the analyst team. Research profiles span from strategic analysis of disruptive technologies and macro-trends to company and product level competitive positioning.

“Our goal is to leverage the significant experience of the analyst team to holistically evaluate impacts to an entire ecosystem, from consumers to components and consumer applications to core infrastructure,” said Sam Skinner, Research Group Chief Operating Officer. “I am particularly excited by the opportunity to bring our thought leading research under the umbrella of Woodside Capital’s FINRA regulated investment banking services.”

For information on a subscription to WCP Research, please contact Sam Skinner at techView@woodsidecap.com or 650.274.2075.

###

Press Contact:

Woodside Capital Partners International, LLC
Rudy Burger, Managing Partner
rudy.burger@woodsidecap.com
+1.650.452.6216

Woodside Capital Partners delivers institutional technology research services and value-added M&A advisory services for emerging growth companies. Securities transactions are offered through Woodside Capital Securities LLC, a registered broker-dealer and member of FINRA (www.finra.org) and SIPC (www.sipc.org), and through Woodside Capital Partners UK LLP, a financial services firm authorized and regulatedby the FSA (www.fsa.gov.uk). Woodside Capital Partners International LLC, Woodside Capital Securities LLC, and Woodside Capital Partners UK LLP are affiliated companies.

Gather ye round and hoist a glass to wash down the following bold and soon-to-be-forgotten prognostications for 2012.

Year 2011 was a busy one for some industry goliaths; Google completed 23 acquisitions alone this year. The next twelve months are likely to feature an increasing number of acquisitions from other tech giants who have been dormant in growth areas such as mobile, cloud computing, and social networking. Economic forecasts have begun to brighten, making investment a more attractive prospect. Meanwhile, a number of young companies have turned the corner from concept to exciting product and have, in turn, become interesting targets for the hungry giants.

China Emerges

Already this year, news from China may be signaling a shift from acquisitions of resource providers, such as oil and gas stakes, to Internet-based, IP-driven firms. Companies such as Hong Kong-based Tencent with a market capitalization of $32 billion, have the leverage to make purchases of U.S.-based Internet companies with or without investment partners.

Many Chinese manufacturing companies are sitting on large stockpiles of cash and need to make acquisitions to enable them to move up the IP food chain. To date, most have been sitting on the sidelines, due in part to concerns over having to manage and assimilate diverse business cultures. Asian manufacturing companies with a market cap of less than 1x revenue struggle with paying “strategic values” for growth stage, venture-backed, Silicon Valley firms. This is all about to change.

For example, Huawei (China’s version of Cisco) acquired several IP-driven companies from overseas this past year, including Symantec’s stake in their joint venture. Although they sometimes face stiff opposition from security-minded U.S. lawmakers, Huawei and other Chinese acquirers in both tech and life sciences will be getting, I expect, more active in the new year.

China has over 420 million Internet users, largest in the world, yet that is less than a third of the population. Still, there remains plenty of room for tech growth in China.

Smart Phone Wars

In the mobile space, Microsoft has been hurting for years. Its Microsoft Mobile operating system was initiated in 2004 and, after a series of mismanagements, was killed in 2008 to be reborn with an entirely new development team. Meanwhile, Google Android and Apple iOS filled the void.

Now called Windows Phone, the mobile operating system has struggled to catch up. According to IDC’s June 2011 analysis, Windows Phone had fallen to 3.8% of the market by midyear.

But that figure is subject to change in 2012, when Windows Phone becomes the primary operating system on Nokia smart phones. If the Nokia hardware can provide the horsepower, the well-regarded Windows Phone 7 operating system will deliver a compelling platform for building mobile apps. And Microsoft may begin piling acquired integrated companies onto that platform, such as Skype and its derivatives.

Who will dominate the Android platform? Until recently, HTC looked like the emerging leader, with its smart Sense user interface and attractive phones. While HTC invested in building its brand, Samsung, a more well-established brand, has iterated on its Android-based products to produce the Galaxy S series, which has seen wide user uptake around the world. HTC may need to make an out-of-the-box acquisition, a bold jump into a new technology, as they originally did on the Android platform. For example, HTC could move into the home automation space by providing devices to automate functions around the home. As home automation moves toward standards-based technologies, integration with larger mobile providers will simplify the acquisition process.

Among mobile phone providers, we can expect more consolidation after Google’s purchase of Motorola Mobility. RIM may be in play for purchase in 2012. The Blackberry brand is still strong, and RIM’s products are still in heavy rotation among corporate and government users. But Apple has clearly stolen their thunder. There is some restlessness among RIM investors, as the stock has plunged from $144 per share in 2008 to below $20. While Research in Motion is planning to release a new version of its operating system next year, its P/E of 4 makes the company a very attractive takeover target, friendly or otherwise. LG, anyone?

Apple

Who should Apple acquire?

We have some thoughts on that.

Electronic Arts

Electronic Arts, the leading provider of console-based games, has been making purchases in the mobile and casual gaming spaces over the past year. In 2010, EA bought Rovio of Finland, makers of Angry Birds, for $20M and followed up by purchasing PopCap games for $750M in 2011. With its recent purchase of KlickNation, EA has made a significant step into publishing on the Facebook platform.

Expect more in 2012 from EA in these areas. In recent years, the console space has been winnowed down to a few major players competing hard to develop hit-driven brands. For these expensive initiatives, it is feast or famine, and more users are choosing to get their gaming fix through casual and social network gaming. One possible target for EA is Roku, which would bring Electronic Arts gaming into the living room through Roku set top boxes.

HP Acquires Salesforce.com and Box

Hewlett-Packard is about to make a big splash back into software.

Prior to his 2011 departure, CEO Leo Apotheker noted that acquisitions will be a key part of HP’s cloud strategy, particularly in software, as the company attempts to move away from strictly hardware lines of business. It’s a sound strategy. While HP may be paying rich multiples for choice targets, the cloud has begun to gather a firm infrastructure beneath it, with plenty of growth coming. Year to date, HP has spent $11 billion in acquisitions, including the purchase of Autonomy.

As little as 2% of HP’s revenue currently comes from software, and it is leveraging its market prominence in printers to expand into print-anywhere management through its recent acquisition of Hiflex. Through its desktop computer business, HP has partnered with Box to provide to purchasers of select units automatic cloud-based storage. This type of integration may expand when HP likes what it sees and, I say here, purchases the entire company.

So far, though, these are modest steps away from the desktop. But why think small? If HP is serious about moving to the cloud, Salesforce.com makes perfect sense.

Comparatively, the San Francisco-based CRM leader has been in the cloud for a long time. Through its AppExchange platform, Salesforce.com has grown into the market leader in cloud-based application development and deployment. However, its enterprise offerings are now encroaching onto high ground for SAP and Oracle; further growth for Salesforce.com may require external partnerships. With a market cap of $50 billion, HP could purchase Salesforce.com, valued at $14 billion. It’d be pricey, but it could turn into a positive for both companies.

Yet, new CEO Meg Whitman has noted that HP will not be venturing into multi-billion dollar buys, instead focusing on fortifying HP’s balance sheet. However, if the right deal came along, one that catapulted HP into a new and hugely profitable area of growth, the balance sheet would take care of itself.

Yahoo! Goes Private

Since the firing of CEO Carol Bartz in September, Yahoo! has initiated a strategic review, which has led some to believe a takeover is in the offing. In 2008, Microsoft tried and failed to purchase Yahoo! for $44 billion. Currently, analysts are valuing the San Jose firm at around $18 billion. Happily ever after, this will not be.

Yet, Yahoo! is still viewed as a leading web portal, and its acquisition by someone with sufficient financial and market might could spell the end for AOL. Who would be that someone?

For Microsoft, the price has dropped greatly, while the attractiveness of the acquisition has held steady. Microsoft Bing currently accounts for 14.7% of search usage, and Yahoo! accounts for 15.5%; together, they would represent a strong #2 to Google’s 65% market share. Additionally, Bing has been a loss generator for Microsoft. However, the 2009 deal with Yahoo! allows Microsoft to run the Yahoo! internet search advertising business, bolstering revenue without the financial investment in the company.

Microsoft’s interest may fundamentally resolve to keeping Yahoo! away from Google, but such an acquisition is not likely. For Google, a direct purchase of Yahoo! would send regulatory red flags up all over Washington; controlling over 80% of the search engine market does not invite healthy competition. Instead, the Google play would be to invest through a third-party consortium to purchase Yahoo!, thereby gaining access to the business lines and technologies of interest to them and shutting out Microsoft. And if the bid fails, perhaps the cost becomes all the more expensive for Microsoft. Microsoft, too, would face regulatory scrutiny, which may lead to a partial investment in Yahoo! to keep it afloat.

There may be a third factor. Yahoo! has a 40% stake in China’s Alibaba, and the Asian search giant wants out. The relationship never developed well, and some believe that Carol Bartz misused one of Yahoo! finest assets. Alibaba may be partnering with offshore investment firms to buy back their stake and take Yahoo! private.

Whichever way the story of Yahoo! pans out, the company is unlikely to be swallowed whole by another giant.

Enterprise Goes Mobile

In 2012, the waves of mobile media will finally prod the giants of enterprise software into a course correction. Leaders such as Oracle and SAP have begun making steps into the social and mobile spaces, as Oracle’s 2011 acquisitions appear oriented toward services and cloud-based offerings. The upcoming year should reveal more aggressive positioning for these giants. Oracle has rolled out Oracle ADF Mobile, which enables enterprise developers to visually build mobile applications and deploy them to multiple channels. We should expect Oracle to begin making acquisitions for greater control of the technical pipeline and to thereby acquire key differentiators from its competition, such as SAP. Additionally, technical solutions for social media should be coming from these leaders, primarily through acquisition.

Retail

Microsoft must be looking with envy at the tremendous success of the Apple stores. Is 2012 the time for Microsoft to make the move into retail?

For Apple, which maintains strong control over distribution, retail operations presented an important opportunity to extend its products into broader consumer product markets. Heading into 2012, handheld technology has arrived to the masses; uppercase tech terms (“Internet” and “Wi-Fi”) have moved to lowercase. Without Apple’s brand cache among the style sensitive, Microsoft may need a branding partner to move into the mall. And what goes better with software than coffee? A purchase of Starbucks with 8,000 locations and $30B in market cap would be too expensive. But perhaps a joint venture could bring the Microsoft brand of products to the café desktop.

May the New Year bring you and yours great success. Cheers!

With $76B in cash on its balance sheet, Apple Computer (NASDAQ: AAPL) is sitting on a huge war chest with which to make a game-changing move. Apple doesn’t pay dividends or conduct stock buybacks. Now is the time for Apple to think big on the M&A front.

Historically, Apple has tended to buy companies that enable it to improve margins on the same products and services or companies that enhance the Apple user experience. For example, Apple acquired Quebec-based Poly9 software in July 2010 and relocated most of its employees to Cupertino, leading to speculation that Apple was taking mapping software in-house to customize the experience for mobile users. A nice, if modest, step. A variety of smaller acquisitions might fill similar holes in their product and service suites.

In this blog, however, I speculate on larger, strategic moves that Apple might contemplate, instead of smaller “tuck-in” acquisitions that will largely go unnoticed. Apple should be thinking big.

Digital Media Content & Delivery

Current speculation about Apple’s next move has centered around a content delivery acquisition, with potential targets such as Netflix, Disney, Hulu, and even News Corp. Apple is not one of the bidders for Hulu (currently Amazon, Yahoo and Dish Network are bidding on Hulu – with Amazon as the odds-on favorite to win the prize). Apple could certainly afford Netflix ($12B market cap vs Apple’s market cap of $333B). With its 16 million North American subscribers, Netflix (NASDAQ: NFLX) would give Apple instant entry into movie delivery and the growing field of entertainment streaming to consumers. For television, mobile handsets, and many other devices, streaming certainly appears to be the future of entertainment delivery, a field Apple has so far failed to energize with its Apple TV product.

However, buying a digital media content business would complicate Apple’s relationship with other content providers, and content, as opposed to software/hardware, has not been Apple’s sweet spot.

Despite their focus on home entertainment, Apple has never developed a strong position in the games market. Will Apple decide to purchase a games company and launch its own games console?

Not likely. With the increasing shift of games online, Apple can catch a free ride in the gaming sector from the success of Zynga and others, without the need to make acquisitions. And games is a hit-driven business; Apple’s entrée would generate a great deal of buzz, but if the content isn’t on the platform, the failures can be abysmal. Given Apple’s philosophy of closely holding their technology, building a network of games developers would require an investment and commitment of a different order.

Home Automation & Security

Apple has been a pioneer in home networking, so why shouldn’t Apple expand the universe of things that can connect to Apple networks? I’m thinking in particular of Apple extending into the home automation and security market by, for example, acquiring Tyco International (NYSE:TYC, market cap = $18.5B).

Tyco International Ltd. operates in five segments: ADT Worldwide, Flow Control, Fire Protection Services, Electrical and Metal Products, and Safety Products. Apple’s interest would likely lie primarily in only the first of these business segments and the remaining segments could be spun out to another buyer. Tyco Retail Solutions (a subsidiary of Tyco International) provides retail performance and security solutions, including RFID tags for inventory management and theft prevention, which might provide a nice tie-in to future iPhone devices with integrated NFC functionality. Item-level intelligence via RFID ultimately extends URLs to physical objects, a physical divide that Google’s business model has begun to cross.

As an added bonus, Tyco International is headquartered in Schaffhausen, Switzerland, where Apple could spend some of its significant overseas cash.

Mobile Product Components

Component companies that push Apple’s smart phones and tablet computer products further ahead in price/performance will be targets of interest, with improvements in display, battery, and camera technologies on Apple’s radar. For example, according to iSuppli Corp, the bill-of-materials (BOM) cost of Apple’s low-end 16 Gbyte non-3G iPad is estimated to be $259.60, and more than 40% of this BOM cost is dedicated to the display, touch screen, and other user interface components. Meanwhile, the display accounts for half the power consumption of an iPad. Clearly, a smart acquisition could pay rapid rewards in this area.

Another idea that has been rumored for a while is for Apple to buy ARM Holdings plc (LSE: ARM, Market Cap = $12B). ARM licenses the semiconductor processor cores that run inside many of today’s mobile products. Just about every Apple and Android-based mobile product on the market uses ARM technology. If Apple purchased ARM, the entire mobile space would tumble into chao. Yet, since ARM has plenty of competitors, it’s unclear whether the anti-trust regulators in Europe and the US would block such an acquisition.

Human Computer Interface

Apple’s products have always been characterized by their simple and elegant user interface. Next-generation user interfaces are likely to make more use of spoken language instructions (voice) and gesture interface. However, I think Apple is more likely to continue to license speech recognition technology from Nuance Communications, Inc. (NasdaqGS:NUAN, Market Cap = $5.3B) than to try and buy it or another provider.

Gesture recognition has started to hit the mainstream market via gaming consoles, such as the wildly popular XBOX Kinect and its dedicated 3D camera. Although gesture recognition has not yet come to mainstream laptop and mobile products, adding another $1 web cam to the top bezel of a laptop would enable the laptop to capture 3D visual data and thus process the user’s hand gestures and facial expressions. I would expect Apple to pioneer gesture recognition technology to add additional Apple magic their products. In fact, the multi-touch technology that ships with all Apple laptop’s and mobile products is an early form of gesture recognition technology. Visual gesture recognition would be an interesting addition to Apple’s rumored entry into the TV market next year.

There are no large public companies that dominate the nascent gesture recognition market at this stage. GestureTek was founded in 1986 in Sunnyvale, California, and was an early pioneer in gesture recognition technology. Qualcomm acquired certain IP assets from GestureTek earlier this year.

Social Media

Social Media continues to be red-hot from an investment and IPO perspective, and Apple has no real contenders in the space. The closest Apple has come to a Social Media offering is Ping, a social media extension to iTunes.
I would expect to see Apple to continue on this organic growth path of building social networks around their customers’ media and to keep back from the social media arena. As suggested by a number of industry pundits, Apple has a pretty well-known disdain for social media. With a loyal army of fans, Apple probably doesn’t feel compelled to reach out; their devices connect them with their customers.

Telephony Operator

Apple’s magic is created by seamlessly integrating software, hardware, and service; you turn on your iPhone or iPad and gracefully step between applications, unaware of the multivariate bridges being crossed beneath – until you lose your signal.

Thus far, in the rapidly evolving mobile and digital streaming arenas, the carriers have held back innovation in their networks for fear of cannibalizing their business. AT&T’s initial unlimited data plan is now being replaced with a tiered usage plan, as they try to scrape revenue from their permanently online user community.

To see the stifling effect the carriers have had on innovation, you need look no further than the lack of unified communication (integrated email, voicemail, sms, chat, etc.) provided by today’s operators. You can be sure that it isn’t Apple holding back this type of innovation on their devices.

There are only two US-based targets that offer both a nationwide cellular infrastructure and broadband to the home: AT&T (market cap of $164B) and Verizon (market cap $94B). Acquiring either one of these companies would be a massive game-changer for Apple and the entire mobile products industry.

The explosion of the iPhone and iPad underscores a recurring theme: software drives sales. Apple has created the elegant platforms and now has the resources to push deeper into the stack, so that innovation continues to reach the user’s fingertips. In acquiring a major carrier, Apple would gain the capability to shape all layers of the user experience, driving innovation from the application layer all the way down to the infrastructure. And Apple’s die-hard user community would switch to the Apple-owned carrier to maximize the experience. For Apple’s competitors, it would be nearly impossible to catch up.

It needs to be said that the challenges associated with an acquisition of this sort would be formidable. The cultural challenges alone of this type of merger would be profound; both Verizon and AT&T are both heavily unionized. Yet, Google purchased Motorola Mobility.

In the next few months, Apple will be positioning itself with its new CEO for its next phase of growth. Mobile remains at the top of the priorities, of course, but with so much in flux in the industry, from hardware into software, there are few strategic moves for a company Apple’s size. Realistically, Apple now has the cash to step into a new arena altogether. Given the thunder and lightning that has accompanied Apple over the past few years, wherever they next make landfall will be in for big change.

In the first half of 2011, the total value of M&A transactions in the United States rose 39% from the same period a year earlier, according to PwC.  Average deal size grew 45%, reflecting an increasingly competitive environment for deals and improved business confidence among buyers. The M&A market is accelerating quickly, as the nose of the global economy begins to tip upward.

This increase in M&A activity has been accompanied by an increase in the number of deals exceeding $10B in transaction value. These mega-deals are being driven by multinationals with large stockpiles of cash on their balance sheets. Despite relatively robust equity markets, 50% of the largest M&A deals across all sectors this year have been transacted in cash.

The multinational aspect is key. At year-end 2010, US companies were holding more than $1.2 trillion in cash balances overseas, according to Moody’s research, an increase of more than 10% over year-end 2009. Global giants Apple Inc., Microsoft Corp., Cisco Systems Inc., Pfizer Inc., and Google Inc. held the largest amounts of cash outside the US.

* Curious note: while Google, Microsoft, and Cisco have consistently been among the top acquirers over the last five years in terms of numbers of acquisitions, Apple (whose $76 billion cash war chest is even greater than the U.S. government’s current operating balance of $74 billion) is not even in the Top 20 technology acquirers over the same period. I’ll explore the reasons and whom Apple should buy in a subsequent blog.

Why are US companies holding so much of their cash overseas?

If these companies repatriate the funds back to the US, they are subjected to a 35% repatriation tax. This helps to explain why Apple has not paid out any of its $76.2B cash pile in dividends to its shareholders. More than $47B (61%) of this cash is held outside of the US and would be subject to repatriation taxes if it were returned home. Add in dividend taxes, and more than 50% of Apple’s cash could be consumed by the IRS if delivered to shareholders — not a good use of their money.

Naturally, a significant chunk of this overseas cash is being plowed back into the soil from whence it came. As a percentage of all US-initiated transactions, the number of mega-deals for overseas companies being acquired by US companies has steadily risen throughout most of the last decade.

These barriers to repatriation contain a de facto inducement for the largest US firms, as they actively encourage global investment in places where earning a buck may be cheaper and easier than in the United States. Call it an implicit global stimulus package. Smaller firms, however, may have a tougher time competing in M&A abroad against these foreign-grown money-making machines. In this ripening investment market, is that a good thing?

The answer, all too often, is about a year ago.

More often than not, privately funded technology firms miss the optimal jumping-off point and get swept over the waterfall from which it may take years to recover, if ever.
Rarely do investors and management teams jump at the right time. Even rarer still is the premature sale. The most common lament that I hear is, “I wish we had sold a year ago.”

Why has this sad ballad been heard over and over?

The Gartner Hype Curve

For venture-backed technology companies, the Gartner Hype Curve has been used to model the expectations surrounding emerging technologies over time.

In the early stages, venture-funded firms are almost completely evaluated on expectations. Hype, scarcity value, and protected intellectual property lift the company up the curve until around the B-round of venture funding, at which point strategic value (as opposed to financial value, as measured by a multiple of EBITDA) may begin to decline, sometimes swiftly, due to market coalescing, competitors, and execution risk. What lies ahead is the real, painful struggle to build a sustainable and profitable company. That part of the curve is much flatter.

Companies approaching the peak of this curve are often filled with good news: new products, expanding partnerships, and surging demand. With so much going so right, why sell?

Because small technology companies are heavily fueled by hope.

Hope of seeing a technology idea come to life spurs founders and early employees to make the necessary sacrifices. And the market loves to buy hope. When the future looks beautifully vague, investors are willing to pay many times over earnings for that future.

Yet in technology, hope cannot withstand much challenge. The triumphant wave of early success can be washed away by the arrival of a trumping technology. The entrance of an 800-pound gorilla into the market makes the route forward so much harder. Even the non-decisions, the forks not taken, can lead to a tumble over the cliffs.

Once hope flees the building, it’s hard to call her back. Where the unknown had been beautifully vague, employees and observers fill those information gaps with negativity. Attrition in the ranks erodes development. Media finds new darlings. Potential investors and partners get skittish. Down the backside of the curve we tumble.

The Core Problem

This moment is missed time and time again because management teams and investors often fail to plan ahead for the exit. For many senior executives, selling their baby may be emotionally difficult to do, so making plans to remove the company from their DNA can seem like a failure scenario.
They’re busy turning hope into something big and real. These moments of hesitation are often exacerbated by VCs who would rather swing for the fences than accept a financial return below the desired 10x multiple.

Then, what typically happens is some bit of bad news wakes everyone up. At a fateful board meeting, it is revealed that the company is running out of cash. Rather than further dilute their positions, the partners decide to sell the company. In a mad rush to beat illiquidity, negotiations are begun under a stinking cloud of desperation, hardly a strong negotiating posture.

Building the Solution

The discussion of exits must be raised early and often. The mechanisms for assessing current exit strategies and the mechanisms for executing those strategies should be laid out as soon as a management team is in place. Those plans should be regularly reviewed by a working group.

As the company evolves, part of the solution is to identify and cultivate potential acquirers. Your company’s most likely acquirer is one of your larger customers, so nurturing those relationships at a C-level can lead to easier and happier outcomes.

In the sub-$100 million category, buyers are looking for 2-3 consecutive quarters of solid growth where everything is trending upward. It is certainly possible to achieve successful outcomes before profitability.

If you receive an unsolicited offer, it’s a good time to test the market to see if there are other interested buyers. Stirring the pot is likely to build or solidify the market for your company. For best results, begin with a small number of firms with whom you have previous relationships or engagements, initiating the discussion with the business development teams – not corporate development.

These initial discussions should be formed around “looking for a strategic partner who may be interested in a commercial relationship and an equity position alongside that relationship.” The potential size of that equity position should take shape quickly. It’s important to have sufficient funds in the bank to say “no, thanks” to the first round of bidders if necessary.

As your company approaches the peak of the Gartner curve, when to sell your company depends heavily on your appetite for risk. When you’ve doubled your money at the blackjack table, are you the sort that starts looking for the cashier’s cage? Or do you settle in to double your money again – and risk losing it all? The answer depends on your appetite for risk and whose money and time you’re gambling with.

Microsoft’s recent acquisition of Skype for $8.5 billion represented the largest buy to-date for the Redmond, Washington giant, and a number of observers have noted that Microsoft overpaid in an act of near-desperation.

Having been a leader in acquisitions over the last decade, Microsoft made no significant acquisitions last year, while Google acquired 25 companies in 2010. Feeling the squeeze between Apple on one side and Google on the other, Microsoft needed to start spending its mountain of cash (still almost $50B) on some game-changing acquisitions.

Skype, the recognized leader in voice and video over the Internet, has a user base of 663 million users around the world in an area that Microsoft has never quite gotten right. Outside of Xbox, the company has struggled in the consumer internet technology space. NetMeeting never caught on, and Microsoft’s Windows Phone 7 continues to trail in the rapidly growing smart phone market, well behind Apple’s iOS, Google’s Android and RIM’s Blackberry product lines.

But let’s not discount Bill Gates yet.

Reportedly, Gates championed the transaction at the board level, calling the purchase a “great deal” for Microsoft’s strategic visions. One of Skype’s key technical strengths is its ability to get through almost all corporate firewalls, which makes Skype and Outlook a nice pairing. Skype also fits well on Microsoft’s Xbox and Lync technology platforms where gaming and enterprise collaboration are converging, respectively. Integrating Skype into the Windows Phone 7 mobile operating system, however, may be the lynchpin of the deal. While Google Voice and Apple’s Facetime platform are emerging, Skype enables Microsoft to immediately deliver a more mature technology than its competitors.

On the sell side, Skype’s recent activity suggests that the transaction may have been necessary for long-term health. In an SEC file for 2010, Skype reported $860 million in revenue and a net loss of $7 million. From their 663 million users, the company took in $1.30 per user. For a company that size, those numbers are not viable over the long term. Some forecasts suggest that Skype’s revenues may have peaked.

Skype has been mulling an IPO for some time, and eBay, one of its previous owners, was reportedly anxious to cash out. Facebook and Google may have kicked the tires on Skype, but neither was considered a serious contender. Google Voice service is already deployed, and a pre-IPO Facebook simply did not have the resources to make a serious pitch.

Compared to Microsoft, neither company would have been appropriate. Skype’s struggle has been in building revenue outside of the corporate sector. While Google and Facebook have commanding positions in search and social networking, they don’t bring in revenue through subscriptions. Their ad-based revenue models may have reduced Skype to a widget. Winner: Microsoft, perhaps by default.

With a huge infusion of capital and a virtually bottomless well of resources now at its disposal, the sale to Microsoft serves Skype the strongest opportunity in the market to grow the company and brand.

In Microsoft, Skype has a partner with which they can face a mutual problem: how to gain share in the casual-use digital landscape. Having been passed through multiple owners before arriving at Microsoft, Skype failed to chart a clear growth path. Integration with eBay didn’t work. Video conferencing is compelling for business users, yet it seems less so for consumers; eBay users preferred the relative discretion of online transactions to seeing a stranger’s face in the computer. With this transaction, Skype may be acknowledging that in non-corporate segments, voice and video over the Internet is a technology component in a wider suite of services, instead of the primary offering.

Microsoft has served notice that, despite the costs, it will remain a leader among the software giants. Where Skype pops up in the Microsoft landscape won’t be known for some time, and how this great digital convergence finally takes shape remains to be seen. But Microsoft has indeed acquired a strategically and technically important piece.

January 13, 2011 – As part of its on-going thought-leadership initiatives in technology investment banking, Woodside Capital Partners today hosted the “Better Acquisitions Gathering 2011”. The Gathering brought together 90 executives including CEO’s from leading venture-backed software and internet services companies, top venture capitalists, and the senior-most corporate development executives from some of the most active acquirers in technology. Collectively the companies at The Gathering led over $25 billion in acquisitions during the past year including some of the biggest headline-grabbing transactions – like NBC Universal (Comcast), Netezza (IBM), AdMob (Google), Playfish (Electronic Arts) and Associated Content (Yahoo!). Speakers included:

• Comcast Interactive Media: Amy Banse, President
• Yahoo!: Jonathon Dillon, Former Vice President, M&A Integration
• Electronic Arts: Mike Foley, Vice President, Corporate Development
• LinkedIn: Robby Kwok, Head of Corporate Development
• CBS, Inc: Zander Lurie, Senior Vice President, Strategic Development
• eBay: Lorraine McDonough, Vice President, Corporate Development
• IBM: Eli Mendoza, Vice President, Corporate Development
• Yahoo! / Advance Publications: Andrew Siegel, SVP, Strategy and Corporate Development, Advance Publications
• Google: Dave Sobota, Senior Director, Corporate Development
• Research in Motion: Chris Wormald, Vice President, Strategic Alliances

L to R: Kelly Porter, WCP; Dave Sobota, Google; Rudy Burger, WCP

Meeting in the ornate 15th-century ballroom of Stonebrook Court under a gilded Venetian ceiling, the executives at The Gathering focused on one of the greatest challenges in the technology eco-system: despite best intentions, there is a high failure rate of technology acquisitions. This is a profoundly important issue to all stakeholders in the technology industry – entrepreneurs, investors, acquirers, suppliers and customers alike. If this issue could be improved even marginally, all would benefit, and it would likely spur even more acquisitions.

Each company discussed their acquisition strategies and growth plans for 2011. Eli Mendoza of IBM described his company’s announced plan to spend up to $15 billion acquiring companies between now and 2015, in order to double IBM’s earnings per share. Dave Sobota of Google described how Google is making a broad spectrum of acquisitions, focused on acquiring great talent, great technology, and in extending further into existing and new markets. Both Amy Banse of Comcast and Lorraine McDonough of eBay discussed the importance of well-considered strategy and also of accountability in integration, and how these factors play-in to their companies’ growth plans.

L to R: Amy Banse, Comcast; Chris Wormald, RIM; Lorraine McDonough, eBay, Robby Kwok, LinkedIn

The Gathering was capped by a special appearance by Jed York, the CEO of the San Francisco 49ers. Jed spoke about how NFL talent acquisitions are analogous to company acquisitions, and lessons that can be applied to business from his experience. The timing of his talk coincided with the hiring last week of Jim Harbaugh as new head coach of the 49ers. Jed also spoke about the opportunities inherent in building a new 49ers stadium in Santa Clara.

L to R: Kelly Porter, WCP; Andrew Siegel, Advance/Yahoo!; Zander Lurie, CBS; Dave Sobota, Google; Eli Mendoza, IBM

The half-day Gathering centered around two panels, the first focused on Acquisition Strategy, and the second on Acquisition Integration. The Better Acquisitions Gathering is part of a series of thought-leadership events hosted by Woodside Capital Partners.

For more information or if you would like to apply for inclusion in next year’s Better Acquisition Gathering, please contact Kelly Porter at 650-559-7700.

Acquisition Gathering, please contact Kelly Porter at 650-559-7700.

Stonebrook Court, Los Altos Hills, CA	Dan Beldy, Steamboat Ventures; Henry Wong, Garage Technology Ventures	Ajay Chopra, Trinity Ventures; Brett Wilson, TubeMogul; Josh Stein, DFJ
Audience members	Andrew Siegel, Advance / Yahoo!; Kelly Porter, WCP	Pejman Nozad, Amidzad; Russ Siegelman, Kleiner Perkins
Market Overview Presentation	Rudy Burger, WCP; Eli Mendoza, IBM; Claudia Fan Munce, IBM	Dave Whorton, Tugboat Ventures; Richard Ling, Rembrandt Ventures