An analyst at Canaccord Adams named Peter Misek caused a minor stir on Thursday when he suggested to Reuters that Research in Motion's weak stock price may induce a buyout bid by Microsoft.
His argument is that Microsoft needs to stay competitive vis a vis Google and Apple in the smartphone arena. Conclusion: "RIM is a massive strategic fit" for Microsoft."
Darwin: Will the rules apply again?
(Credit: Wikimedia.org)I'm not so sure that Microsoft would help itself by going the RIM route, but Misek's instincts are sound in one respect: the global turmoil might--and the operative word is might--spark a vigorous round of mergers and acquisitions in the technology business once normalcy returns.
What with one stock sell-off followed by another, the tech sector's biggest names have all taken their lumps. Ditto for the start-up crowd. By now, you may have read or heard about the "R.I.P. Good Times" presentation Sequoia Capital gave earlier this week on behalf of its client companies. Om Malik, who was first to report the news, offered this grim assessment:
Folks this is bad news for Silicon Valley, which has been living in a bubble, assuming that it is going to weather the global economic storm without being impacted. We have been following this story since last year, pointing out that the tech (industry) is not an island.
It's hard to disagree with Om's conclusion. Writing in Forbes today, columnist Sramana Mitra urged Silicon Valley's leaders to lead the country out of its "current miasma of fear."
Steve Jobs and Eric Schmidt to the rescue? Well, those guys are good, though not that good. But considering that we are about to start the weekend, let me try and find at least one silver lining.
The last time a stock panic ravaged Silicon Valley, what happened? There was no shortage of post-bubble doom and gloom but the technology industry mended on its own. Hewlett-Packard bought Compaq, Oracle acquire PeopleSoft, BEA, and J.D. Edwards, IBM acquired Cognos, Ascential, Rational, MRO Software, and a host of other mid-sized enterprise software companies and, of course, Google bought YouTube.
Once the smoke clears, the tech industry will undergo a similar round of Darwinian consolidation--and that's hardly a bad outcome. Do you really think Compaq would have prospered had HP not swooped in? Ditto for all those enterprise software companies had not IBM and Oracle gone on buying sprees?
I pinged a venture capitalist who I've known for years for his take. Here's part of what he wrote: (sorry, no names)
When your mail popped in, I was on the phone with several M&A companies talking about that exact strategy. One thing actively floating around is this pushes consolidation of small/mid-tier players. Then those resulting companies are the actual targets.
My Microsoft buddies tell me that the pile of crippled technology companies (crippled from a funding perspective) is so large and the prices so cheap, they have a decent pick at figuring out plays in markets, etc, whereas six months ago these options didn't exist. Bulking up the search assets, for example, is a big priority and this situation helps. But there are serious cutbacks happening at all of the big guys, so it remains to be seen if anybody will actually act on this.
In other words, chalk it up to the fear factor. Taking a deep breath as I write this, you've got to believe that that narrative will change--predicting exactly when, of course, is the hard part.
• Postscript:
With the market's slump, Larry Ellison told shareholders at Oracle's annual meeting that the company may take advantage of the recent stock volatility as an opportunity to acquire other software makers.
Click here for ongoing coverage from CNET News, 'Tough times for tech'
Apple fan boys (and girls) are counting down the days before Worldwide Developers Conference on Monday. Everyone and their mother-in-law expects Steve Jobs to use his keynote at the event introduce new iPhones, including new 3G models and a less expensive refresh of the 2.5G version.
Microsoft marked the occasion with a reminder to Windows Mobile partners that the company "will sell nearly 20 million Windows Mobile smartphone licenses."
In an e-mail, Andy Lees Sr., the company's vice president of Mobile Communications, heralded this as a "milestone" adding that year-over-year Q1 unit growth in Windows Mobile "was greater than sales of Apple's iPhone."
But not so fast. The reliably excellent Todd Bishop at Seattlepi.com spotted this little scooplet:
Microsoft said it expected to sell "more than 20 million" Windows Mobile licenses in the current fiscal year, which concludes at the end of this month. In today's letter, Microsoft's Andy Lees instead says the company "will sell nearly 20 million Windows Mobile smartphone licenses."
He's right. On February 10, Microsoft issued a press release where the company offered that prediction for fiscal 2008.
Scott Rockfeld, group product manager in the Mobile Communications business, downplayed the apparent contradiction.
"The way to look at this was that this was definitely a casual reference in a thank you letter," he said. "It shouldn't be seen as anything more significant. We've always said we'd be at 20 million. That's our goal. If it comes up short, it really, truly is a rounding error."
"Ultimately," he continued, "it's just a great time to reach out to our partners...there's a lot of misinformation out there. The reality is that when you look at the numbers, we're outselling RIM and significantly outselling Apple...it was just time to reach out and say, 'Hey guys, we've done amazing things the last six years and there's going to be no ceasing of our innovation in the future.'"
I once asked Steve Jobs why Apple was so indifferent toward corporate customers. At the time, big companies were in the beginning stages of one of their periodic PC upgrade cycles, leaving Dell virtually alone to clean up.
So, didn't it make sense to more aggressively pursue that business? Jobs froze me with one of those looks.
Steve Jobs: Consumers rule but how seriously is he thinking about Corporate America?
(Credit: Dan Farber/CNET News.com)That's not an interesting market, he said. Next question.
Silly me.
Of course, Jobs was entirely right. IT has since become a predictably cyclical business, while the real sizzle in tech turned out to be in the consumer space. Besides, Apple's been able to win over increasing numbers of corporate converts without doing much--let alone paying for an expensive sales force to knock on corporate America's doors. (Last year, its enterprise share grew threefold to 4.2 percent, according to Forrester. However, the uptake was largely confined to enthusiasts and small work groups.)
Jobs' pursuit of the consumer assumed that computers would become media terminals in millions of homes. Not overnight, but over the course of years. It was a wise hunch. In the early part of the decade, the computer industry was at a point where home networking technologies were still limited and consumers were only then starting to move video content from Internet-connected devices to televisions in sizable numbers.
Now we're witnessing a interesting confluence of events. Apple's plying its consumer expertise to take the iPhone into the corporate marketplace. At the same time, Research in Motion is adopting the opposite tack with its product line. (RIM is reportedly working on an iPhone killer although details are still sketchy.
Just as Jobs has been deliberate about the business market, Research in Motion's co-CEO Jim Balsillie is taking his time targeting consumers. The indirect hints about RIM coming after Apple make for tantalizing speculation. But the real spadework is taking place on RIM's flank, where Balsillie is deepening the company's alliances with enterprise partners. That's why he's at the Sapphire conference in Orlando, Fla., this week, talking up a deal to run SAP's CRM application natively. Larry Dignan at our sister site ZDNet literally ran into Balsillie at the conference, where he pressed him about what's next:
Balsillie said one path would be to expand into adjacent SAP applications for direct store delivery, salesforce automation, and human resources. Another path would be to go after analytics and embedded business intelligence. Balsillie said he's leaning toward the latter, but noted that "it's just my opinion" and he would have to consult with developers, product managers and other key people inside RIM and SAP.
That network of relationships with enterprise vendors will come in handy if RIM decides to more directly confront Apple. When Jobs gives his WWDC keynote in early June, he is expected to unveil new iPhone models. Maybe he'll also have more to say about any new friends he's made in the corporate world.
Times change and who knows? He may have concluded that it's become a more "interesting" business.
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