By Ben Kolada
While we're in a season of slim pickings for tech M&A, one market that's ripening is the sale of spoiled fruit. Major tech companies such as Microsoft and VMware are now selling flagging businesses at an unusually quick clip.
There are a variety of reasons why companies would sell assets during every part of the economic cycle. But right now, as growth slows across much of the established tech markets, companies are increasingly focusing on the relatively few areas that are recording sales increases. (To continue our gardening metaphor, it's similar to a person cutting off a dying bulb so that the rest of a plant can flourish.)
Microsoft (MSFT), for example, announced its second asset sale in as many months, selling its Mediaroom IPTV distribution platform to Ericsson (ERIC). (Last month, Microsoft sold its Atlas Advertiser Suite assets to Facebook (FB).) Mediaroom was part of Microsoft's Entertainment and Devices Division (EDD), which includes Xbox, Skype, and Windows Phone assets. EDD revenue rose in FY 2012 primarily due to Skype and Windows Phone revenue, but has declined 8% in the two quarters since as Xbox sales sank.
And in the case of VMware (VMW), the sizzling growth of its core virtualization software in previous years allowed it to expand into new markets. But as the company's top-line expansion dipped to 22% in 2012 from 32% in 2011, it announced a refocus of its business. VMware sold its SlideRocket assets in March, and may consider selling other noncore businesses.
Select Asset Sales in 2013
Source: The 451 M&A KnowledgeBase.