Tag Archives: M&A

Microsoft will integrate LinkedIn into Dynamics and Microsoft Office 365

LinkedIn is a small company compared to Facebook, and the stock had fallen out of favor after a cautious outlook earlier this year. The stock plummeted more than 40% in just one single day in February this year.

That was then. Now, the went straight up on good news, and the stock skyrocketed 46% in one day. Investors jumped in on the news on monday. Microsoft announced that it has agreed to acquire the professional networking platform in an all-cash deal worth $26,2 billion.

 

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Microsofts CEO Sataya Nadelia said The deal would «bring toghether the worlds leading professional cloud with the worlds leading professional network», and LinkedIns CEO Jeff Weiner will remain at the helm of the social network.

Microsoft is paying $196 a share for LinkedIn.

What company could be better than LinkedIn in terms of their position and opportunity for growth? The price Microsoft paid was fair, and this acquisition will make LinkedIn more valuable under Microsoft`s umbrella than a standalone company.

Microsoft is still one of the worlds biggest companies, and this acquisition was brilliant. Its not difficult to see what Sataya Nadelia is thinking. He will probably integrate LinkedIn into Microsoft Office 365 and Dynamics.

Marketers and professional networks will still use the platform and integrate it in their sales process. They will be more willing to pay for training and to keep on building marketing campaigns their new CRM.

Microsoft will improve the Dynamics CRM software and Office 365 enterprice offerings, and there is no doubt that Microsoft is interested in more market shares in the CRM business. They want to build out their Customer Relationship Management to compete with Salesforce.

A few weeks ago, Microsoft was the first bidder for Marketo which is part of the automated marketing space. And they have enough cash to buy them all. But they are not interested to spend some cash on this acquisition. They will make a loan to avoid a 35 percent tax bill.

Just like Apple last year. They have $180 billion overseas, but borrowed $6,5 billion to pay shareholders a dividend. We still have low rates, and that`s why we have seen a huge activity in M&A recently.

It would be stupid not to do that.

Many big tech companies have a lot of cash. Alphabet Inc, Apple, Microsoft and Facebook have hundreds of billions of dollars in cash and you can imagine their opportunities in the future. But I must admit it was a surprise that Reid Hoffman sold his «baby» to Bill Gates.

What I expected was to see Twitter in that position. Not LinkedIn. But for all I know, maybe Twitter is the next takeover? It`s beginning to be cheap with a market cap of about $10 billion. If this continue, the share price can drop down to about $5.

Twitter should sell before they are worthless. If Google or other media companies wants the platform, they can have it for almost «free» if they wait any longer.

 

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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Twitter and Facebook can make a MEGA-merger

CEO Jack Dorsey in both Twitter and Square, announced today that Twitter will lay off about 336 employees, which is about 8 percent of Twitters workforce. The engineering team will be downsized in a restructuring plan.

Twitter has a lot of obstacles, and CEO Jack Dorsey is hired to solve them all. He is still holding down his second job as CEO of Square in addition to his «full-time» job in Twitter. The biggest challenge is to reach the mass audience.

Jack Dorsey said in an e-mail today that the engineering team will become «smaller and nimbler», while other groups will be «streamlined».

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The new restructuring plan will cost about $10 to $20 million. Cofounder Jack Dorsey said that this is necessary to make Twitter grow. I`m always very sceptical when I hear companies cut to make growth. Is this the beginning of the end?

What I think is; do we really need Twitter? Many of the Twitter users are the same as Facebook users, but there is a huge difference between them. Isn`t it easier for people to be on one platform then two with the same product?

The same can be said about marketers. They are actually spending twice as much money on much of the same target. All of the MAU`s at Twitter is also Facebook users. Today Twitter`s users are more professional than all the users at Facebook, but Facebook is a similar social-media platform with much of the same products.

Twitter and Facebook are both in the same market which is both based on micro-blogging. What Twitter need now is to build a new product and reach the masses. If not, it would be a great idea to merge with Facebook. What about a MEGA-merger?

Investors sent Twitter`s stock right up on the hiring of the new permanent CEO Jack Dorsey, but is it good news to cut employees right after the end of Q3? Last quarter didn`t show any cost side of the income statement, and now we are seeing that their cost is a problem.

Twitter`s Q3 street consensus on revenue is $559 million, and have nearly 4,000 employees. Facebook`s Q2 revenue is eight times higher and have «only» 11,000 employees. Twitter`s stock has plummeted from about $70 to about $30. Facebook`s stock has skyrocketed. From about $20 to about $95.

Facebook`s market cap is 262,32 Billion while Twitter`s market cap is «only» 21,10 Billion. In comparison; Apple Inc`s market cap is 640,58 Billion.

Many of Twitter`s MAU`s are world leaders, celebrities and more. We can see millions of Tweets everyday. Everything from live commentary to cultural memes to name a few. Very good, but is it enough in the long run? I think some investors has a mixed feeling.

Twitter`s third-quarter earnings will be in focus, and their user growth is one of the most important factors to look at. The red flag for Twitter`s user growth has been hold high before. Their user base grew 12 percent YoY, but just 0,07 percent sequentially. MAU was up 15 percent, but only 2,6 percent sequentially.

This is not the growth you expect from a micro-blogging, SMS based, social media company like Twitter.

User growth is what I will look for in Twitter`s Q3 report on Tuesday, October 27, 2015.

 

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One of the biggest tech acquisitions ever

I wrote about M&A deals in December 2013 and December 2014. I predicted that the M&A deals would increase and Michael Dell know as many other CEO`s that this is the right time to acquire and merge. Dell announced it will acquire EMC Corporation today.

This is one of the biggest tech acquisitions ever! The biggest acquisition is the disastrous AOLTime Warner merger in 2000. An event I remember very good. The Dell/EMC deal is the second largest.

Michael Dell and his company Dell Inc revealed monday that they will acquire EMC Corporation for about $67 billion in cash and stock. Chairman Michael Dell is now creating a very powerful powerhouse enterprise company.

I don`t think HP like this deal at all, because the demand is still declining while the competition is very tough. With this acquisition, Dell will try to build a tech giant with a wider product lineup and get a profitable edge over their competitors.

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EMC Corp operates in the Data Storage Devices industry, and it operates in three segments: EMC Information Infrastructure, Pivotal and Vmare Virtual Infrastructure. If you are a EMC shareholder, you will get $24,05 per share in cash as well as tracking stock linked to EMC`s interest in VMware.

You will get about 0,111 shares of new VMware tracking stock per share, and the deal will close next year.

VMware declined over 9 percent on news on the Dell/EMC deal, but it’s up again from start Monday. At the same time, VMware pre-announced it expected Q3 revenue of $1,672 billion, which is up +10 percent Y/Y, with a EPS of $1,02. Total revenue is expected to come in at only 3 percent. Look out for full Q3 results on October 20.

The company can become a takeover target for larger tech companies in the future, and VMware can be candy for HP, Oracle or Cisco Systems Inc to name a few.

EMC rose over 9 percent in pre-market trading Monday in New York. EMC has pre-announced it expected Q3 revenue of $6,05 billion to $6,08 billion, with a EPS of $0,43, which is below consensus of $6,25 billion and $0,45.

Dell had stakes in four different firms in 1999 and 2000, but have since then acquired plenty of different tech companies. They had a stake in Fast Search & Transfer with a value of $25,200,000 in January 31, 2000.

Most of the companies that they have acquired is U.S companies and this is the way Dell has expanded. The acquisition today is the biggest ever, and Dell has about 111,000 employees with $57,2 billion in sales last year. EMC is a leader in cloud-based storage and pulled in$24,4 billion in 2014.

The Dell and EMC deal will make them one of the world`s largest privately held tech company.

 

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M&A continues

All sectors was in a red territory yesterday, but only one of them was up. The biggest loser was energy and the winner was the heath care sector. So far in 2014, the biggest loser is the energy sector, while the health care sector is the winner. This is just what I expected it to be in 2014. Read my article titled; health-care bull, dated January 8, 2014.

The takeover boom is not over yet, and 2014 will be the best in many years. Lawyers working with advice on takeovers say they`ve got a robust pipeline of deals in the works. Some of their works is delayed, so December will be busier than usual.

Health care stocks soared in 2014 and next year is shaping up to be another great year for these stocks.

The shares of Cubist Pharmaceuticals Inc rose 35% yesterday, and the reason is that pharmaceutical giant Merck (MRK) want to acquire its smaller peer for $102 per share. Included the debt, the deal is valued at $8,4 billion. This deal will strengthen Merck`s leadership position in the hospital acute care market.

Two of Cubist Pharmaceutical`s three commercial products focus on treating difficult-to-fight infections, and the firm`s reputation has become a «superbug» specialist in a business that has overlooked such infections until fairly recently.

The deal will be financed primarily by the issuance of about $9,5 billion in new debt, and Merck expect the deal to add about $1 billion in annual revenue. Cubist Pharmaceutical`s drugs should become significantly accretive to Merck`s EPS from 2016.

I wrote about M&A activity last year. Read my article titled M&A (merger and acquisition), December 13, 2013. First of all; it is very lucrative for companies to buy now when the interest rates are historically low, and I think this will continue until the Fed makes a jump on the interest rate.

If you look at 2013, the S&P 500 was up about 30%, and that was a good sign of a healthy stock market. Credit markets was also good with higher leverage levels. About 18,000 Private Equity Firms were also looking for liquidity given strong prevailing market conditions, in addition to increased corporate cash and finite-lived private equity capital reserves. All this factors have led to high degree of M&A activity in 2014, but what about 2015?

Predicting the future is risky business, but what are you gonna do if you don`t belive in something?

By tracking global sell-side mandates and deals reaching the due-dilligence phase of a transaction, it is possible to forecast future deal levels. If you look at the deal volume reported by Thomson Reuters, you can indicate future changes in the numbers of announced M&A transactions.

The latest Q3 data this year will forecast Q1 2015, and that suggests sustained momentum in M&A activity through 2015. Deal volume is expected to go up, and hot sectors will be entertainment, media, consumer, manufacturing and telecommunication. The most active sectors are expected to be energy and technology.

A forecast is based on facts today, but as you may know everything can change tomorrow. A change in macroeconomic or political conditions or even a change in the financial markets will change the whole picture and that can happen overnight.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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