Posted on March 15, 2007
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On the heels of the Microsoft announcement to buy TellMe yesterday Cisco has agreed to acquire WebEx for about $3B in cash. This is also our first company in our Web20 index to be acquired so we will need to select a new one in the coming months as this deal closes.
Microsoft and Cisco have had an awkward dance of cooperation and competition over the years since the first Microsoft Active Directory was launched a decade ago. Today this interaction is getting more heated as collaboration becomes central to corporate IT activities. Microsoft had acquired Placeware sometime ago is #2 in the market after WebEx.
WebEx has a network of 3000 servers and over 2M subscribers who use their technology as an on-demand platform for collaboration. Cisco sees that unified collaboration and communication are growing fast and particularly important in the SMB market when it can be offered in a SaaS format.
With $380M in C06 revenues Cisco is paying about 7.6x TTM sales. Guidance calls for minor reductions to earnings in F07 and F08 with additions coming in F09. Because WebEx has established distribution channels, partners and a strong business model it will be run as a stand-alone business and integrated into Cisco operations over time. This is said to represent a “new model” for Cisco. It seems similar to the VMWare structure at EMC for now. Cisco is talking about opportunities in the distribution channel but already has substantial established channels with resellers, direct and lower end products like Linksys.
These moves raise more questions:
Posted on March 14, 2007
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About a year ago we had the chance to hear from Michael Dell. He didn’t say much of interest at the time but one comment really stuck in my head. He said “I’d sure like to be selling systems based on OS X.”
Most of the current commentary around Dell centers on Linux and Vista. However now that Michael is back in charge he is clearly in a position to at least have a conversation with Steve Jobs and Apple about the potential for Dell to do something with Apple.
It’s hard to picture because Dell has built a company around commodity products and in many ways is almost the opposite of Apple when it comes to the industry. However for all the Apple success they are still just beginning to gain some share in the enterprise.
The attraction for Dell is clear enough, they need to do something to improve their image and restore some quality to their brand name. For Apple the attraction could only be distribution although Apple stores and their own online capabilities seem to be working just fine. Still what a major endorsement it would be for Dell to announce they would be shifting to include OS X-based systems in their plans.
We have just seen some small movement in non-Apple sources for OS X based systems with the Mac Tablet announced during the recent MacWorld.
Even though I can’t see a clear path to a deal of some sort, that comment from Michael Dell continues to haunt me.
If anyone else has an idea of how this could work please share your thoughts.
Posted on March 9, 2007
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Yesterday we attended an investor presentation in Paris from the CFO of Logitech. There were a few things that struck us as a definite downtick from the last time we saw them present on December 5th in London.
Part of it is just the borderline arrogance that comes from a good record of success. They highlight their selection as one of the “ten best stocks in the world” by Motley Fool and that they keep “good company” with the likes of Google, Apple and so on. (Microsoft is left off the list BTW.)
We have liked Logitech for some time and even had a long position off and on (we have no position now) but when presentations get highly general without any specifics we get worried.
Furthmore we continue to have concerns over the company’s ability to gain more traction outside of their traditional stronghold of mice and keyboards for Windows. (Most Apple stores we visit have far more Belkin and other brands in place than Logitech.)
The final point is a subtle one. Yesterday the CFO made greater than usual use of the phrase “we are neither changing nor reaffirming guidance at this time.” It’s not by nature a red light but hearing it four times during a 25 minute presentation when we get few specifics makes us a little nervous.
Logitech has some great assets including their database of protocols to unify the myriad devices in consumer electronics (the universal remote is probably *not* the answer in our view.)
While we do not have enough specifics to go short the stock we feel warned off from buying it and if we were long would probably sell and revisit the story later this year going into a seasonally stronger time.
Posted on March 6, 2007
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The coming IPO of ClearWire has many talking about increased competition and even price wars in the mobile data space. We certainly need them.
Today it is still hard and expensive to make mobile data work well beyond isolated applications like email. A recent look at EVDO reveals pages of information to know about selecting and installing hardware and software, different coverage areas and even awareness of EVDO versiosn and the dreaded 1XRTT or even worse 1XRTT roaming. The average consumer responds: “What the hell is all that about?!”
Beyond the design of the iPhone there is some promise here that new networks will get rolled out by AT&T that start to make it easier to contemplate real mobile computing, at least in the US.
Going abroad still requires a digital landing party of experts to change our phones and data methods.
The interesting part about all this is cost. Mobile broadband is in the range of $700-$1200 per year plus device in the US. Most users also pay for fixed broadband via cable or DSL to the tune of $500-1000 per year in round numbers depending on the capacity desired. There is increasing talk about each player slashing prices of the item they are most poor at. Kind of a “hey, why not?” strategy.
There are also new technologies from WiMax to FLO coming into the market. Notably laggards in the US like Alltel and T-Mobile are doing trials of FLO. This could point to some technology competition in the mobile markets as well.
The market sure needs it. We can thank Apple for design innovation and maybe Craig McCaw and Qualcomm for network technology evolution. Still in all we need help to drive adoption given the $2000 price for a two-year TCO on a mobile data capability.
Who wins? Well it’s been written before that the obvious winner is Google. We aren’t sure the providers themselves win with dropping prices even if unit costs are declining. We’d sooner look at chip and device providers ranging from Qualcomm to SiRF to RIMM and Apple.