Is Microsoft The Ultimate Value Trap?
Amit Chokshi, CFA • 90 Comments
Amit Chokshi, CFA • 90 Comments
Is Microsoft The Ultimate Value Trap?
Amit Chokshi, CFA • 90 Comments
Amit Chokshi, CFA • 90 Comments
Dec. 31, 2015, 7:03 PM
- Cisco (NASDAQ:CSCO) could make a bid for storage array vendor NetApp (NASDAQ:NTAP) and threat-prevention hardware/software provider FireEye (NASDAQ:FEYE) in 2016, thinks FBR's Dan Ives. Cisco/NetApp speculation has been around for a while. Meanwhile, Cisco has made several security acquisitions in recent years, and appears to be up for more, but has also launched products that compete with FireEye.
- Ives also thinks IBM could bid for machine/log data analytics software leader Splunk (NASDAQ:SPLK) and business intelligence/data visualization software firm QLIK. With a $7.6B market cap and high multiples, Splunk would be a costlier acquisition than IBM's traditional fare.
- HP Enterprise (NYSE:HPE), meanwhile, is seen as a potential suitor for both Qlik and enterprise cloud storage/file-sharing leader BOX. And Oracle (NYSE:ORCL) a potential buyer of cloud ERP, HR, and e-commerce software firm NetSuite (NYSE:N). Larry Ellison owns a large stake in NetSuite (more SMB-focused than Oracle), and the company both competes and partners with Oracle.
- Microsoft (NASDAQ:MSFT), which has made plenty of acquisitions in the Satya Nadella era, is seen as a potential buyer of database security software and Web app firewall vendor Imperva (NYSE:IMPV), as well as of cloud vulnerability management and compliance software firm Qualys (NASDAQ:QLYS). Symantec (NASDAQ:SYMC), which has signaled it will make security acquisitions after the sale of its Veritas unit closes, is considered a possible acquirer of e-mail/compliance security software provider Proofpoint (NASDAQ:PFPT).
- Yesterday: FBR sees improving cybersecurity spend, likes several stocks
Dec. 21, 2015, 1:23 PM
- Microsoft (MSFT +0.6%) has bought Talko, a developer of iOS/Android apps that enable workgroups to collaborate via live and recorded voice and text. Terms are undisclosed.
- Notably, Talko was founded by Ray Ozzie, Microsoft's former CTO and chief software architect, and someone once referred to by Bill Gates as one of the best programmers on the planet. Ozzie won't be rejoining Microsoft, but the rest of Talko's team will be coming on board.
- Talko's technology will be integrated with both Skype and the Skype for Business (formerly Lync) unified communications platform. In addition to saving voice conversations, its apps let users tag and bookmark specific moments during a talk, and use a phone's camera to share related photos or live video. Saved content gets stored in the cloud, and cached on devices.
- Microsoft has made a string of productivity app purchases in recent years, as it tries to keep Google and upstarts such as Slack (Pending:SLACK) at bay. Past deals include Yammer (enterprise social networking), Sunrise (calendars), Acompli (e-mail), and Wunderlist (to-do lists).
- Separately, Barron's is out with another bullish column on Microsoft (it also had one in July). The paper once more praises Satya Nadella's cloud investments, argues Azure's hybrid cloud support acts as a selling point as it battles with AWS for enterprise accounts, and argues shares could rise 30% over the next 18 months.
- Last week: Goldman upgrades Microsoft, company buys data integration/analytics startup Metanautix
Dec. 18, 2015, 9:50 AM
- "We were wrong," writes Goldman's Heather Bellini while upgrading Microsoft (MSFT -0.5%) to Neutral after keeping shares at Sell amid a major 2-year rally. Her target has been hiked by $12 to $57.
- Bellini: "We are increasing our out year non-GAAP EPS estimates, driven primarily by faster gross margin expansion in Office 365 and Azure. While we still believe EPS consensus for FY17 and FY18 are too high, given the ongoing successful transition to the cloud we do not see the multiple coming under pressure."
- She adds several 2016 catalysts exist: A continued successful cloud transition, gross profit dollar growth (in spite of cloud-related margin pressure), EPS growth, the diminishing of headwinds related to weak business PC sales and the Office 365 transition (pushes out Office revenue recognition), and accelerating dividend growth.
- Shares are off slightly in spite of the upgrade. Bellini's upgrade comes a day after Microsoft made a fresh high of $56.79, before retreating a bit.
- Update: Some more Microsoft news: The company has bought Metanautix, a startup providing software that enables SQL databases to access and integrate numerous data sources for analytics purposes. Microsoft, which has made a string of analytics acquisitions in the Satya Nadella era (see Datazen and Revolution Analytics), plans to integrate Metanautix's technology with Azure and SQL Server.
Nov. 9, 2015, 1:42 PM
- Secure Islands' software automatically classifies, sets access policies for, and (if needed) encrypts unstructured data (documents, e-mails, photos, etc.) when it's created or otherwise first enters a company's IT infrastructure. It also provides an auditing/reporting tool for providing an overview of a company's data usage.
- Microsoft (MSFT -1.8%) is buying Secure Islands for an undisclosed sum. ZDNet reports the purchase price is ~$77.5M; Globes reports it's between $100M-$150M.
- Microsoft: "This acquisition accelerates our ability to help customers secure their business data no matter where it is stored – across on-premises systems, Microsoft cloud services like Azure and Office 365, third-party services, and any Windows, iOS or Android device." Secure Islands' technology will be integrated with Microsoft's cloud-based Azure Rights Management service, which (for $2/user/month) protects e-mails, Office docs, and other content from unauthorized access.
- Secure Islands is Microsoft's third acquisition of an Israeli security tech firm in the last year. The others are cybersecurity/identity-protection software vendor Aorato, and cloud/SaaS app security software vendor Adallom. The company has also recently bought two other Israeli companies: Text-analysis/e-discovery software firm Equivio, and Surface stylus chip developer N-trig.
- Secure Islands already has a partnership with Adallom. Varonis (VRNS -1.4%), a leader in the unstructured data management/governance software space, is a rival, as are EMC and Dell.
Oct. 2, 2015, 2:30 PM
- Microsoft (MSFT +0.9%) has bought Havok, developer of a widely-used 3D physics engine and related tools for game developers, from Intel (INTC +0.7%) for an undisclosed sum. Intel bought Havok in 2007, reportedly for ~$110M.
- Game developers that have used Havok include Activision, Electronic Arts, Sony, Nintendo, and Microsoft itself. Microsoft declares the purchase complements its existing developer tools and platforms, such as Visual Studio, DirectX, and Azure, and promises to continue supporting 3rd-party game developers and Sony/Nintendo consoles.
- Microsoft: "Havok shares Microsoft’s vision for empowering people to create worlds and experiences that have never been seen before, and we look forward to sharing more of this vision in the near future." The purchase follows last year's $2.5B acquisition of Minecraft developer Mojang, and comes as Redmond both gets set to launch its HoloLens augmented reality headset (will support gaming in addition to enterprise/productivity apps). and partners with Oculus to support the use of its Rift VR headset with Windows 10 PCs.
Sep. 11, 2015, 2:46 PM
- A buyout rumor has once more given a lift to AMD (AMD +9.8%): This time, Fudzilla (citing "industry sources") states Microsoft (NASDAQ:MSFT) is "seriously talking" to the hard-luck chipmaker about acquiring it.
- A number of AMD buyout rumors have come and gone over the years without panning out. KitGuru reported in June Microsoft "may acquire" AMD.
- AMD was previously trading near breakeven in spite of an upgrade to Market Perform from Bernstein's Stacy Rasgon, who argued bad news has been priced in and that "the possibility of a lifeline may be growing."
Sep. 8, 2015, 7:02 PM
- Ahead of tomorrow's expected unveiling of a 12.9" iPad Pro, Microsoft (NASDAQ:MSFT) states Dell and HP will begin reselling its Surface Pro high-end tablet/convertible line and provide related support services.
- The deals are part of a broader Surface Enterprise Initiative meant to boost corporate sales - IT services giant Accenture is also a partner - and suggest at least two major PC OEMs have made peace with Microsoft's decision to compete against them via the Surface line.
- With the low-cost Surface 3 providing a lift. Microsoft's Surface revenue rose 117% Y/Y in calendar Q2 to $888M. A new high-end model - the Surface Pro 4 - is rumored to be launching this fall.
- Separately, Microsoft has confirmed its purchase of Adallom, an Israeli provider of cloud-based software for securing popular cloud/SaaS apps from the likes of Salesforce, Box, ServiceNow, Amazon, Google, and yes, Microsoft (Office 365/Yammer). Bloomberg and TechCrunch report the purchase price is ~$250M, less than the $320M previously reported by the WSJ.
- Microsoft: "Adallom expands on Microsoft’s existing identity assets, and delivers a cloud access security broker, to give customers visibility and control over application access as well as their critical company data stored across cloud services ... Adallom will complement existing offerings that Microsoft makes available today as part of Office 365 and the Enterprise Mobility Suite (EMS), including our recent Microsoft Advanced Threat Analytics release."
Aug. 6, 2015, 2:15 PM
- P-E firms Permira has closed its $5.3B ($48.75/share) acquisition of Informatica (INFA +0.4%), a deal first announced on April 7. Sohaib Abbasi will step down as Informatica's CEO, but remain chairman.
- Along with the deal's closing, Informatica has announced Microsoft (NASDAQ:MSFT) and Salesforce.com (NYSE:CRM) have become "strategic investors," taking stakes of undisclosed sizes in the data warehousing software vendor.
Jul. 20, 2015, 4:18 AM
- Microsoft (NASDAQ:MSFT) has reportedly decided to acquire Israeli cloud security company Adallom for $320M, marking the group's largest-ever acquisition in the country.
- Over the past year Microsoft has scooped up several other Israeli firms, including Aorato (cyber security) for $200M, Equivio (text analysis) for $200M, and N-trig (digital pen) for several tens of millions of dollars.
- Adallom has raised $49.5M to date from investors Sequoia Capital and Index Ventures as well as EMC and Hewlett-Packard.
Jul. 7, 2015, 12:41 PM
- After following markets lower earlier today, Workday (WDAY +1.1%) has turned positive in the wake of a column from The Information's Steve Nellis arguing Microsoft (NASDAQ:MSFT) should buy the cloud HCM/financials software leader.
- Nellis: "Only Salesforce (NYSE:CRM) and Workday have enough revenue momentum to help Microsoft become a major seller of software for tracking customers, employee records and financials. But Workday is the better choice for several reasons, including the fact that Salesforce’s products feel dated."
- CNBC reported in May Microsoft held buyout talks with Salesforce, the sole enterprise cloud software pure-play larger than Workday, while adding the companies "remained far apart on a price."
- With a current market cap of $14.8B - would the company be willing to sell at $19B-$20B? - Workday would be a much less costly acquisition for Microsoft than Salesforce ($45.3B market cap). Both the company's forward sales multiples and expected growth rates are notably higher than Salesforce's.
Jun. 29, 2015, 11:22 PM
- KitGuru, not a site with a long track record of delivering M&A scoops, reports (citing a source) Microsoft (NASDAQ:MSFT) "may acquire" AMD.
- It adds Microsoft approached AMD, which provides the APU for both the Xbox One and PS4, about a buyout several months ago, and that "the result of the talks is unclear."
- AMD rose 3% in AH trading to $2.41 on the rumor, after having fallen 5.3% in regular trading thanks to a broad market rout. Shares also fell sharply on Friday, following Micron's results/guidance.
- Back in 2012, BSN reported Intel is thinking of acquiring Nvidia and making Nvidia chief Jen-Hsun Huang its next CEO. That rumor didn't quite pan out.
Jun. 29, 2015, 3:10 PM
- UBER is acquiring map image-collection assets from Microsoft's (NASDAQ:MSFT) Bing unit to strengthen its internal mapping work. About 100 Microsoft employees will be joining Uber. Terms are undisclosed.
- Uber, whose apps have been relying on Google Maps, has been rumored to be interested in Nokia's HERE mapping/navigation software unit. However, a recent Bloomberg report indicated Nokia prefers to sell the unit to a group of German automakers.
- Earlier: Top Chinese Uber rival Didi Kuaidi reportedly looking to raise ~$2B
Jun. 1, 2015, 9:49 PM
- The WSJ reports Microsoft (NASDAQ:MSFT) has agreed to buy 6Wunderkinder, the German developer behind popular to-do list app Wunderlist, for somewhere between $100M-$200M. Presumably, offshore cash will be used.
- Wunderlist claimed 10M users as of last December for its apps, which are offered on iOS, Android, Windows Phone, and the Web. In addition to basic to-do list functionality, Wunderlist supports cross-device syncing, list sharing, and photo/PDF attachments. Google Play shows a rating of 4.4/5 stars, and the App Store 4.5/5 stars.
- Microsoft has increasingly looked to acquisitions strengthen its mobile productivity app lineup. Recent purchases include calendar app maker Sunrise (has partnered with Wunderlist) and e-mail app Acompli; Acompli's apps now underpin revamped Outlook mobile apps.
- Update (6/2): Microsoft has confirmed the acquisition. As usual, deal terms are undisclosed. In what's possibly a sign Microsoft plans to integrate Wunderlist with its OneNote note-taking app, the blog post announcing the purchase was published by OneNote GM Eran Megiddo.
May 22, 2015, 1:19 PM
- CNBC's David Faber reports Microsoft (MSFT -0.7%) held "significant talks" earlier this spring about acquiring Salesforce (CRM +2.4%), but the companies "remained far apart on a price." Microsoft was reportedly willing to offer $55B for Salesforce (current market cap of $49.3B); Salesforce CEO Marc Benioff is said to have wanted as much as $70B.
- Faber adds the talks aren't expected to restart anytime soon. Aside from the price difference, Satya Nadella was reportedly "somewhat reluctant to pull the trigger on a deal of such size and consequence for his company."
- Bloomberg reported on May 5 Microsoft is "evaluating a bid" for the cloud CRM software giant - Microsoft's name had already loomed large in speculation about a rumored suitor. Reuters reported soon afterwards Microsoft wasn't currently weighing an offer.
- Salesforce has spiked higher on the report. Shares are up 6.3% since the company posted an FQ1 beat and reported 31% Y/Y deferred revenue growth on Wednesday afternoon.
May 18, 2015, 3:10 PM
- Bloomberg reports Baidu (BIDU -0.8%) is teaming with top ride-sharing platform Uber and P-E firm Apax Partners to jointly bid for Nokia's (NOK +0.7%) HERE mapping/navigation software unit. Sources state the business could fetch as much as $4B.
- A rival group consisting of Chinese messaging/gaming giant Tencent (OTCPK:TCEHY), Chinese mapping firm/Tencent partner NavInfo, and Swedish P-E firm EQT Partners is also reportedly bidding. A group of German automakers (mentioned in past reports) and a trio of P-E firms are reportedly interested as well, and Microsoft (NASDAQ:MSFT) has offered to buy a minority stake.
- The next round of bids are reportedly due in 2 weeks. Baidu is said to be partnering with Uber to "avoid regulatory scrutiny." The NYT previously reported Uber has bid up to $3B for HERE, which has a dominant position in the in-car automotive market.
- Separately, Baidu has announced a "strategic investment" in content recommendation platform Taboola - readers may be familiar with the "Recommend for you" article boxes Taboola provides at the bottom of articles on partner sites. The WSJ reports Baidu, which plans to bring Taboola's platform to China, invested $20M-$30M.
May 8, 2015, 4:03 AM
- Microsoft (NASDAQ:MSFT) currently is not weighing an offer for Salesforce.com (NYSE:CRM), Reuters reports, saying that Microsoft sees the CRM software giant's market valuation as too expensive.
- Earlier this week, Bloomberg reported that Microsoft was evaluating a bid for Salesforce after the latter was approached by another unnamed would-be buyer.
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