Communications and Technology Blog - Tehrani.com - Merger/Acquisition Archives

Facebook Buys Mobile Photo Sharing Site Instagram

2012-04-09T17:51:48Z

Even before its IPO, Facebook has decided to make a major acquisition with millions of users for a billion dollars of cash and stock. Mark Zuckerberg mentioned on his Facebook timeline that this acquisition of Instagram is the largest they have ever done and may be the last of this size.
Moreover, that Facebook will leave Instagram as a standalone company insomuch that you will be able to use Instagram without sharing on Facebook if you so choose.
The move was a very smart one as Instagram could eventually be a threat to the company's core business. Furthermore it allows the social networking giant to gain even greater access to the mobile market - the fastest growing segment of just about every tech business. And even more importantly is the cover the company has in the form of Google+ allowing it to gobble up marketshare without regard for antitrust concerns.
Reminds me of Oracle putting together a major software company with major marketshare using the cover of Microsoft competition.
Will Pinterest be next? How about Twitter? At this rate the tech investment euphoria which we really haven't seen in over a decade seems to be coming back.

Vocalocity: One Cloud Provider's Path to Growth

2012-03-10T18:36:07Z

Cloud computing providers are all the rage these days and cloud communications is no exception. Witness the growth of 8x8 as well as the M&A interest in the space evidenced by the recent acquisition of M5 Networks by ShoreTel and the acquisition of Aptela by Vocalocity.

I recently had a chance to speak with Wain Kellum the CEO Vocalocity to get a sense of how his company is differentiating itself from other hosted/cloud providers in the space. First off the combined company has over 15,000 customers and over 100,000 network endpoints.

The main takeaway from the conversation to me is that voice is increasingly becoming a service integration and enhancement game. In other words cloud-based dial tone is necessary but only a very small piece of what customers will come to expect from cloud communications companies.

In fact Kellum told me the company adds new innovations each quarter for the same price. While we expect continuous upgrades from computer companies like Microsoft, Apple and Google’s Android – this focus on increased innovation has become a bigger deal in telecom as the cloud has become more important.

Salesforce often will tell you that a reason to purchase service from them is to avoid the disruption and compatibility issues inherent in typical premise-based upgrades. From an IT department’s perspective, what could be better than coming in on a Monday morning and learning that your software-as- a-service solution has been upgraded automatically. Premise-based upgrades typically required IT teams to come in on weekends and often these upgrades needed to be rolled back because they in-turn cause other compatibility issues.

And this of course explains why often, many organizations run old software – a few versions behind the current one because they don’t want to be on the bleeding edge of the product upgrade cycle.

So what sorts of innovations can a cloud-based communications provider provide? One which Vocalocity employs is checking the IP address of phone calls every five seconds and in the case of an outage, transferring the call to a backup number like a cell phone.

In addition the company has integration into standard CRM and accounting systems as well as integration in the insurance space through a recently announced integration with eAgent an online insurance and document management company. Accounting integration with solutions such as NetSuite, Quickbooks and Sage allows customers to see the payment history of companies when they are on the phone. This could be quite useful as not only an aid to the collections process but to ensure sales isn’t spending excess time selling to customers who aren’t paying their current bills.

The company also has big data analytics capabilities allowing companies to determine which workers are less productive and which customers are consuming the most agent time.

Wain also went into a story about an ice storm which hit Atlanta, where the company has its headquarters and he said the company ran seamlessly – employees could take and receive calls from home and he was able to manage everything from his iPhone. He said, none of his customers knew the city was shut down.

One of the interesting areas of growth he sees is enabling hybrid systems where the hosted solution sits in the background and connects multiple branches or offices. Using ATA adapters he explains that legacy phones become a “poor man’s SIP phone.” The hosted solution he explains can also be used as the redundant service.

The company’s backend systems consist of using multiple cloud vendors and federation at the call level. Customer calls are lumped into small clusters and can be transitioned to another area of the country as a result of a catastrophic problem in one location.

The company plans to continue to acquire and thinks there is an opportunity to buy a number of hosted providers who aren’t innovating and then rolling the customers over into their platform. They have no plans to go public at the moment and don’t need to raise money but may consider getting financing if they find a very large acquisition target.

Recently I opined about future acquisitions that will take place in the cloud market in response to the ShoreTel M5 merger and focused on the CPE companies like Cisco and Avaya. It should be clear to all of us that the cloud players too are looking to grow through M&A and companies like Vocalocity, 8x8 and others are obviously not standing still.

11 Things Yahoo Must Do Now That Yang Has Stepped Down

2012-01-18T15:14:56Z

As reported on TMCnet yesterday, Jerry Yang, co-founder of Yahoo has stepped down from the board to pursue other interests. We have a great deal to thank Yang for – as the first company to categorize the web and build out many free services, society has benefit greatly from what Yahoo has more or less given away for free. That is the positive – the negative is the company has eroded top management and investor confidence for many years. Not to mention the botched Microsoft acquisition some years back at a valuation more than double what the company is worth now. To summarize the challenges at Yahoo, its a giant sloth competing against gazelles like Google and Facebook.

The massive amount of innovation and competitive instincts shown by Google’s founders as well as Mark Zuckerberg is a start contrast to Yang who never struck me as a competitive businessperson. Now that he is gone altogether and new CEO Scott Thompson is at the helm, here are some of the areas of focus the company should be dealing with in no particular order.

Marketing

Yahoo has tremendous depth – a dizzying array of services, apps and products – in many cases, the press and people outside Yahoo working on the projects aren’t aware of them. The first step in turning around a company is improving communications and making your services more sticky. Obviously this can only be accomplished if users know all there is to explore and benefit from.

Social

Yahoo has increased its ties with Facebook – in fact I would say it has done a great job in this regard – but the company needs to reach out to the Twitter community as well – and how about Instagram – this up and coming mobile, social photo-sharing network would be a strong asset in a world where there is value associated with owning the social network.

Mobile

Continuing on the social theme and merging it with mobile is Yahoo’s IntoNow app which allows an iPhone or iPad to become an interactive, social TV terminal. You can login with Facebook and the program will listen to your TV, decipher what channel and program you are watching and share the information with your friends. From there you can communicate with your friends about the program.

This is an awesome app which needs to be promoted more widely. Moreover, Yahoo has to do more leading-edge work like this. Then it may be up to the press to start covering it more.

Cloud

Google and Amazon are generating real revenue from the cloud and there is an opportunity for SMB and enterprise dollars if the company can find new and creative ways to leverage its data center. There are many small businesses for example that use Yahoo Mail… What about new hosted apps to extend mail into CRM, accounting and other areas? This can be done with partners if need be.

Music

According to Alexa, music.yahoo.com gets 1.42% of the site’s traffic which isn’t bad – but what about a mobile app for music like Pandora? Does it make sense to pick up this company, Spotify or Slacke? How about a closer working relationship? Seems there is lots of opportunity here for growth.

Movies

This is a tougher one – the company’s movie site gets 2.3% of its total traffic – it could be better perhaps with more custom content. To that end the company announced they joined forces with Playtone and Reliance Entertainment to bring Tom Hanks' multi-dimensional animated series "Electric City" to Yahoo! in 2012.

This could be a big break for the company and with YouTube launching original content channels by the dozen this move must be done to remain somewhat competitive.

Be cool

Apple, Google and Twitter are cool – Yahoo to me seems very corporate. The company has to loosen up its culture and its way of doing business. One of its biggest challenges is the hipsters and even younger generations aren’t using email which means Yahoo has to find new ways of remaining relevant with this crowd. If the image of the company isn’t right to begin with, any new services will have a lower take-up rate.

Expand

Google comes out with so many new services so quickly it makes the head spin. Yahoo is much slower in this area and needs to speed up. They need to take a group of top engineers and set them free to discover the next big thing(s).

Partner

I’ve mentioned a few partnership opportunities above but there needs to be many more. Partnering is an inexpensive way to grow your business while helping another company grow theirs.

Behavioral Targeting

Why isn’t Yahoo the best at returning ROI for advertisers? It should be as it has just so much information about its users. Years back I wrote about how Google’s purchase of DoubleClick would put the search leader in a better position in terms of analytics but I never imagined Yahoo wouldn’t be a powerhouse in this area. The company needs to improve and quickly.

Election

Yahoo needs election tie-ins and as many as possible to stay relevant. By this I mean it needs to be involved in building the community of questions and answers for many of the televised debates. YouTube is doing this as is parent company Google. Likewise for Twitter and others – Yahoo has to do better.

These are just some things Yahoo can do to improve its performance and perhaps more importantly relevance. In Internet time, Yahoo at over 15 is a dinosaur. The question is with Yang’s departure and a new CEO can the company reinvent itself as an embryo or will it be bogged down in-part due to a stodgy corporate culture which took years to build and may take even longer to dismantle.

Can Incumbent Companies be Disruptors?

2012-01-14T10:30:41Z

Business disruption through technologies they never saw coming is fascinating to me. I have been fortunate enough to be in the technology and communications spaces at a time when the pace of change has been breathtaking.

Consider for example in the 1980s when Rockwell one of the leading ACD manufacturers collaborated with IBM to enable computer-telephony integration or CTI. As a point of reference an ACD is an automatic call distributor and is the machine that asks you to press one if you are calling about domestic travel and so on. Now the reason CTI was important had to do with the ability to pull customer data from a contact management database so the call center worker knew who was calling in advance of the call. And these systems were far from cheap – they cost millions and Rockwell and IBM had a nice revenue stream because call centers could justify these huge bills because they reduced the amount of time agents spent on the phone as data entry time was minimized.

But less than ten years later Microsoft and Novell the leading OS vendors at the time decided they would telephony-enable their operating systems through protocols named TAPI and TSAPI allowing an off the shelf server to do CTI.

In less than a decade customers benefitted not only from Moore’s Law which reduced prices dramatically but from a shift from proprietary to open systems. Rockwell’s leadership position which they held for more than a decade was gone overnight. And although the company tried to be competitive by launching a PC-based phone system, they were never able to overcome changing market forces.

Interestingly Rockwell’s pain was Dialogic’s gain as the company made DSP resource boards the essential components allowing communications systems to be integrated into servers and PCs. These high-margin boards sold like hotcakes in the nineties as companies used them to build all sorts of solutions such as of course ACDs and international call back systems – where an international caller would make a call to the US and hang up after the first ring. At that point a US originated call was made enabling the caller to connect to their party at much lower US rates.

Then one day an Israeli company VocalTec decided to take these DSP resource boards and use them to construct VoIP gateways and this development took the communications market into uncharted territory as Intel saw all the ruckus and decided they needed Dialogic and went out and purchased them. The theory was DSP resource board technology could be integrated into the CPU.

Along the same lines HMP or host media processing was born allowing the processor in the server to do the job once only made possible by a standalone board packed with DSPs. Moore’s Law as you know is a powerful force and eventually multicore CPUs made short work of large-scale VoIP.

So we took a sophisticated hardware problem and turned them into software. Whenever that happens we generally know margins erode quickly. After all if a college kid can make a social network in his dorm room that about a trillion people are using – anything and I mean anything can be done with software with far less resources than hardware.

So we went from DSP resource boards for computer telephony which eventually enabled IP-telephony to IP telephony running on processors which eventually led to Skype.

Let’s summarize what happened here. Open systems helped decimate the margins in proprietary ACD market and Dialogic benefitted. Then Moore’s Law coupled with VoIP helped reduce the need for dedicated boards. Skye for its part made VoIP easy and became a multibillion dollar success.

The question is whether or not a rapidly evolving tech environment is one in which old leaders can remain at the top of the pack in the new world. Microsoft for example made serious inroads into the mobile phone space yet Google and Apple annihilated it there in short order. On the other hand, it is still trying to compete with its Bing search offering and yesterday in fact the blogs were abuzz with important people in the blogosphere saying they will switch from Google to Bing.

Bing is by no means a serious threat to Google but at least Microsoft is in the search game as a result of this offering and over time Bing could become a player in a market where Google is currently a monopoly.

It is my belief that corporate culture and marketing myopia contributes to the death of companies at the hands of disruption. In this piece on TMCnet the author goes on to describe how the “dictatorship of the customer” leads to corporate death. Moreover companies no comprehending how broad a market they are in face death. In other words railroads are in the transportation business not trains. There is a big difference.

For example Kodak saw years back that it was going to have to have an online photo service to offset its declining film revenue. It purchased Ofoto and really didn’t make it a much better platform. It didn’t expand it into a video sharing service for example. It could have developed YouTube and Facebook combined if it had the vision to see that photo sharing was just the beginning. But to Kodak its core business and culture was all about making money from the printing of photos not advertising supported content storage.

Moreover as Kodak began to expand into the online photo realm its retailers such as the pharmacies started to revolt as they now saw the photo processing company as a competitor.

Disruption is fun but its results on an industry are brutal.

Moreover in technology the disruption comes from everywhere. Tablets are hurting PC sales and more or less killed the netbook market. At CES this week the Samsung Galaxy Note turned out to be a killer product merging the best of a tablet and phone into a single device. Basically it takes two market segments revolutionized by Apple and disrupts them both with a “tweener” device.

I’d like to add that it is insanely difficult to predict the next big thing and even when you do timing is even more of a challenge. The first wave of VoIP companies perished, likewise the first laptop company died and the first successful social network was sold for less than $40M recently.

But there is an opportunity for executives to become more strategic in their thinking. After all, a laser like focus on customer satisfaction didn’t help the Wang Company when the PC was invented. On the flipside the tablet could have killed the Kindle but Amazon came out with a Kindle Fire and sells it at a loss allowing it to retain control of the book market and expand into new spaces.

Let’s be a bit more specific. Are newspapers in the business of selling ads or ensuring that advertisers get the best ROI on their investments? Seems to me they are in the business of connecting buyers and sellers – yet it doesn’t seem many of them think this way.

Are retailers in the business of having concrete stores with high rents or selling more products profitably to their customers than the competition? If it is indeed the latter then where is he global network of retailers allowing them to pool warehouse space and other assets to more effectively compete with Amazon? Where is the collective alternative to Amazon Prime which Macys, Wal-Mart, Target and others belong to?

As I have said before, it is better to be quick than right but I would add that if you are able to think strategically and then act decisively – without worrying about cannibalizing existing businesses you will have the best chance of surviving the eventual disruption you will face in your markets.

So yes, incumbent companies can be disruptors but only the best run companies who have tremendous vision and the ability to acquire, integrate and execute.

What You May not Know About the AT&T T-Mobile Breakup

2011-12-24T12:34:58Z

Most of my readers no doubt know that AT&T has decided not to pursue the acquisition of T-Mobile USA because the US government deemed the transaction would hurt consumers.

One of the best articles I have seen on the matter however comes from the AP and is worth a read. Here are some highlights:

The Justice Department had sued on Aug. 31 to block the merger.
AT&T's purchase of fourth–ranked T–Mobile, announced in March, would have made it the largest cellphone company in the U.S.
AT&T will now have to pay Deutsche Telekom $3 billion in cash as a breakup fee and give it about $1 billion worth of spectrum.
It will also enter into a roaming agreement with Deutsche Telekom so that AT&T's and T–Mobile's customers can use each other's networks.
Craig Moffett says AT&T's spectrum needs aren't so grave that it needs to make a large acquisition right away.

Will AT&T Divest in 2012?

2011-12-22T19:11:21Z

TMC Senior Editor Peter Bernstein thinks AT&T may explore divestiture options next year and it is a conceivable thought. Moreover, what is worth thinking about is what will the Department of Justice do with other high-profile acquisition attempts next year. After all, Peter’s prediction is obviously made because in-part the AT&T and T-Mobile deal wasn’t approved.

Many of Peter’s predictions for next year are thought-provoking and AT&T is number one of the list. As I think about it, I wonder if other large transactions will not be attempted next year because companies are waiting to see if there is a change in administration. After all, the Obama administration has never been seen as a fan of big business or any business outside of the green technology space. Would any large company go through a major acquisition and spend millions on lawyers and fees to not only find out it isn’t allowed but moreover that they have to pay a huge break-up fee?

Perhaps just as importantly, the bankers were to make $200M on the AT&T transaction and they could have used the money since so many other parts of their business are under fire from Dodd-Frank and its revenue destroying, proprietary-trading eliminating Volcker Rule and of course Basel III which limits bank risk-taking and increases capital requirements.

Moreover – I will make a prediction that if a new administration is elected in November of next year – we will see more large mergers attempted.

Peter’s other predictions are worth reading as well… They focus on Apple, Microsoft, Visa and he has some interesting twists and turns in his logic worth following.

While on the topic of predictions I have to say I am surprised an asset like Myspace was not purchased and integrated into a well-known platform. I suggested Twitter buy them this past January and instead they were sold to Specific Media for $35M. The traffic on the site is declining but it is still in the top 138 sites in the world according to Alexa. But the chart shows page-view traffic is declining so it would make sense for Specific Media to sell this asset to someone who can do more with it in 2012. For now through the company is doing its best to keep the social networking site relevant by adding a new music player to what they say is the world’s largest music library. In addition, it allows free unlimited on-demand listening, personalized radio and improved search. Perhaps once the smartphone apps come out and if there is traction, the company will see its valuation increase.

Other than this recommendation, I am not certain I will make any predictions at this point – if I do, you’ll see them on tehrani.com so stay tuned, happy holidays and New Year!

Why Blocked AT&T, T-Mobile USA Deal is Good for Growth

2011-08-31T17:47:13Z

Critics might say, in the history of M&A, it is difficult to recall one instance where more jobs were created as a result of two companies coming together. Yet this is the argument AT&T has been making for just less than three months after the merger announcement with AT&T and T-Mobile USA was announced. In part the argument was reinforced by the company's commitment to bring remote call center jobs back to the states.

Moreover, AT&T’s claim that this merger would be good for consumers is an interesting one as critics might say it is fairly easy to argue either side.

For example, if the merger were to go through, AT&T would have tremendous incentive to upgrade the speed of its network because as of the last year it has started to charge for bandwidth – eliminating unlimited plans. In other words, the company would be motivated to speed up its network to ensure it could charge customers more per unit of time they use network services.

In the alternate scenario, improving network speed would be something done to stay competitive and passing on the higher costs of network improvements to consumers could only be done if other carriers decided to do the same thing. In the situation where free market competition is in play, companies will have to be more innovative, trying new tactics to get a leg up on the other wireless carriers. And in this scenario, consumers win.

Last month I asked if this merger would slow wireless innovation and one of the points I made was that T-Mobile USA and Sprint have been more aggressive working with smaller equipment providers who rely on deals with smaller carriers to keep their investors interested and motivated to pony up more cash in the hopes of eventually landing a big global carrier at some later date.

It seems the FTC agrees as they filed a civil suit this morning to block the deal citing that T-Mobile has been a disruptive force in the market. The complaint further cites a T-Mobile document in which the wireless carrier explains it has been responsible for a number of significant "firsts" in the U.S. mobile wireless industry, including the first handset using the Android operating system, Blackberry wireless email, the Sidekick, national Wi-Fi "hotspot" access, and a variety of unlimited service plans. T-Mobile was also the first company to roll out a nationwide high-speed data network based on advanced HSPA+ (High-Speed Packet Access) technology. The complaint states that by January 2011, an AT&T employee was observing that "[T-Mobile] was first to have HSPA+ devices in their portfolio...we added them in reaction to potential loss of speed claims."

The size of the breakup fee is $3B in cash and potential a billion dollars or more in spectrum so we can expect AT&T to fight this decision tooth and nail. It is worth pointing out that Deutsche Telekom, the parent company of T-Mobile USA believes the breakup fee is worth $6B.

But one has to wonder what AT&T knew and what inside information they had to decide to go ahead with this deal. After all, there are few if any business leaders who believe the Obama administration and by default the federal government is pro-business. Steve Wynn is perhaps one of the most vocal and worth listening to. And if there is even a hint that consumers would be hurt in this transaction, wouldn’t it obviously be denied?

So what possessed AT&T to go forward on this deal if they didn’t have amazingly good inside information?

And the timing – it just couldn’t be worse – AT&T CEO Randal Stephenson was on CNBC this morning touting how good the merger would be for the US economy – pledging in part to bring 5,000 wireless call center jobs back to the US if the deal was approved.

Then a few hours later the DOJ makes the announcement – almost the moment after the CNBC segment was complete.

If there is an interesting twist in this news it’s that the Communications Workers of America Union is very supportive of the merger as according to CNBC, AT&T is a union shop while T-Mobile USA is not. They even said publicly that the DOJ lawsuit is the wrong decision for jobs. As the Obama administration is extremely pro-union, having the CWA on-board could have been a big reason that AT&T felt confident they could get this deal through.

So I can’t help but to conclude that DOJ used common sense here and although AT&T’s arguments as to why this merger would be good for jobs and consumers is likely true for the short-term, over years, having one less wireless carrier would mean less innovation not just from the perspective of competitive pressure in the marketplace but from the resulting death of a slew of wireless equipment and service providers who rely on smaller carriers like Sprint and T-Mobile to get their start as telecom equipment providers.

It is worth reminding my readers that I have pointed out often in the last few months that call center jobs in India are becoming a problem because Indians don't look favorably at the work anymore and moreover, the competition for labor is so great that wage inflation and turnover rates are skyrocketing. The videos below give you a further taste of what I mean - so we might expect AT&T Mobility and other call center jobs to end up back in the states regardless of the results of this attempted acquisition.

Got Big Telecom Data? You Need Infinity Ear from Empirix!

2011-08-16T08:35:59Z

OK, this isn’t a real product name – yet but you could potentially help pick it – be sure to let the company know if you have a name for their new product line.

I sat down with Tim Moynihan and Gordon Eddy of Empirix at SpeechTek and was happy to hear the company has been experiencing double-digit growth. Testing companies like Empirix are a great barometer for the markets they serve as they grow with the percentage of deployments in the spaces are in. In this case, the company is seeing increasing orders as a result of the migration to IP so SIP trunking and SBC deployments have really helped the bottom line.
Moreover, companies are seeking out testing services from Empirix before they deploy CRM, call center and UC services.

Mergers have been another positive factor in the company’s growth as companies have to ensure their disparate systems can interop smoothly before they go live as part of a more seamless network of communications systems.

An interesting area of expansion will be introduced this fall – analyzing “big data” for the telecom space. The point here is big data is being scraped and analyzed with positive results in data centers but there has been a lack of tools to do the same in the telecom space. You could use such a solution to determine how a massive amount of data growth on a network would bog down voice and video calls.

Speaking of video, the company is beginning to get requests for video testing, meaning video is likely past the tipping point – of course this may not be the biggest surprise – but it’s always good to get 3rd party verification of what the research analysts and Cisco ads tell us.
Regarding the big data product – it doesn’t have a name yet and I couldn’t help thinking of a few names myself. Empirix used to be called Hammer Technologies in the nineties and the Hammer product line exists today. As you can imagine the name refers to “hammering” systems to ensure they operate correctly. These products have evolved of course and a cloud-based Hammer solution is available for really large tests.

So I figure if Hammer is the name of the testing tool the listening/analytics tool could be called the Ear or perhaps the Antenna. I am thinking you need a really large ear for big data so how about Infinity Ear? Dear Empirix, don’t worry – you don’t have to pick my name – I always have my day job. But how about some advanced notice before you release the actual name? :)

Why Windstream Bought PAETEC

2011-08-01T14:35:08Z

Broadband and communications provider Windstream Corp just agreed to purchase communications conglomerate PAETEC for $2.3 billion in order to add scale and drive growth. PAETEC is an interesting company as it not only provides broadband and IP communications services; it also has data center services, is a large telecom reseller/interconnect, provider of telecom expense management (TEM) solutions and more.

Earlier this year I reported that PAETEC CEO Arunis Chesonis was looking for potential acquisition targets in India and elsewhere and in fact the company did just pick up XETA Technologies to boost its cloud-based service offerings. Interestingly his own company may have been in play while PAETEC itself was exploring more acquisition targets. Keep reading to learn more about other potential acquirers.

Large companies getting larger

Carriers are getting larger – and not just the largest, AT&T and T-Mobile (if it closes), Verizon purchased Terremark and CenturyLink recently picked up Savvis. In order to compete in commoditized business like broadband and voice, scale matters. Peter Radizeski has important comments about this very issue worth reading on his TMCnet blog. Here is an excerpt:

All that unused fiber. The owners of the VAR's - of Quagga, XETA and USEP - who now have to feel slighted. Are probably asking themselves the same thing that I am: WTH???

But if you look at the acquisitions being all over the map - and that Arunas was in India recently where he was rumored to be trying to sell to Tata - then you have to figure the runway ran out on Wall Street for PAETEC. Meaning that organic growth just was not happening.

With everything that is going on in the economy an out industry, sustaining growth is almost impossible. Revenues can not go up when prices are dropping. (This is why the cellcos are going metered -- it's the only way to bring in much needed revenue in a flat market.)

Strong stock prices low interest rate environment

Tech and telecom companies are trading at fair to optimistic valuations and relative to other spaces, these areas are generally good places for investors to be. Moreover, borrowing costs are low, making it a good time for sellers and buyers to be exploring options.

Cloud, cloud and more cloud

A big part of the growth strategies of virtually all telecom companies is data centers and the cloud and PAETEC has been investing in this space making this an important reason for the company to be acquired.

Fiber is in strong demand

With the massive need for bandwidth for things like wireless backhaul, the combined company with 100,000 fiber route miles is in a great position to cash in on the future need for broadband speed.

This deal positions Windstream as a major force in the communications space and it will be worth watching what it decides to do with the various businesses PAETEC is in. Will it choose to invest and growth them – selling TEM services to its current customers or will it make sense to focus just on cloud-based services for the future and divest some businesses which may be considered non-core.

Keep Bing at Microsoft

2011-07-26T17:17:12Z

From a competitive position, it would be major trouble to remove Bing from the deep pockets of Microsoft. Talk of the business being potentially sold to Facebook when that company needs to focus on fighting Google+ makes little sense. There are few other strong software companies beyond Oracle and Salesforce who I think could do a better job with Bing than Microsoft.

But like I said in May, Microsoft is doing as much as can be expected with Bing.

We know Marc Benioff loves Google so count them out of such a purchase - and Oracle, no fan of Microsoft or Google probably doesn't need the headache or the money-losing business as it is doing fine right now, thank you.

Microsoft has to continue to make Bing better while simultaneously forging stronger relationships with companies who are competing with Google. Facebook and Twitter are two obvious ones - perhaps LinkedIn is another company to work very closely with.

You see as long as Google is a dominant player in so many spaces, Microsoft can play the underdog position and work with all the companies they want. And US and EU regulators won't be able to say much about these deals.

This is more or less what Oracle did - it rolled up the CRM and other corporate software markets under the cover of competing with the Microsoft monopoly.

Are you using Lync or USING Lync?

2011-07-18T08:22:24Z

Thought leader and noted UC analyst Blair Pleasant is skeptical that 70% of the Fortune 500 are implementing and using Lync. But Steve Ballmer tells us that 70% are on Lync. As we all know, there is a difference between using something and really USING it. Especially when you consider how many workers a typical Fortune-class company has - does a few people per 100,000 constitute real use? We need more accurate usage numbers to back up his claim.

The interesting thing is you can likely argue that almost all companions use Skype in some capacity - and as it merges with Lync - you could say virtually all companies of any size use Lync. I wonder what Blair will have to say about that.

HP Itanium Feud with Oracle Hurts Customers Most

2011-06-09T18:33:38Z

Oracle is Big Enough to Strike Fear and Low Key Enough to Escape Massive Media Scrutiny

Oracle is fiercely competitive - in and out of the water

The rivalry between HP and Oracle is definitely heating up and the endgame probably isn’t good for HP. For more than a decade an acquisition spree at Oracle has allowed it to become a software behemoth depended on by IT departments worldwide. And as the company rolled up industry after industry (CRM in particular) they were able to get regulators to buy–in because Oracle was one of the software companies acting as a counterbalance to Microsoft. And Oracle unlike most of the tech companies I come across knows how to acquire and integrate - and do it well. They are so successful they now supply 100 out of the Fortune Global 100 and have more than 345,000 customers.

But now with so much software concentrated in a single company, Oracle has incredible power. They have the ability to raise prices on maintenance contracts and customers have limited options. This brings to mind an article from Bob Evans at InformationWeek last year talking about how at the time Oracle’s maintenance business had an operating margin of 92% on more than $3B in a quarter!

But most importantly they have the power to really hurt their enemies.

And if you haven’t noticed, one of Oracle’s biggest enemies lately is HP and Oracle’s Sun acquisition has placed the companies in direct competition.

The latest in this rivalry is Oracle’s decision to pull support for Intel’s Itanium processor - Kevin McLaughlin at CRN details how Oracle has decided to drop support for the chip powering many HP computers and in response, HP is using social media to try to persuade Oracle to change its mind.

Jeffry Burt at eWeek explains how many Oracle customers are unhappy with the decision – this isn’t surprising as making multimillion dollar hardware platform bets only to find out your software won’t run on the platform you chose is never good. Especially when budgets call for hardware platforms to be around for many years in order to be cost-effective.

HP’s official corporate blog has more but the post is not as diplomatic as I would have expected. I was surprised to read that it said:

Oracle continues to show a pattern of anti-customer behavior as they move to shore up their failing Sun server business. HP believes in fair and honest competition. Competition is good for customers, innovation and the marketplace.

My surprise is not in the accuracy of the above statement but more that HP and Oracle, like it or not are tied at the hip since they both have many customers in common. And keeping these customers happy should be their primary jobs. But in the case of Oracle – they have what you might want to call an entrenched position in the market and customers are extremely dependent.

Oracle’s statement on its Itanium decision is well-worded and is in its complete form below:

After multiple conversations with Intel senior management Oracle has decided to discontinue all software development on the Intel Itanium microprocessor. Intel management made it clear that their strategic focus is on their x86 microprocessor and that Itanium was nearing the end of its life.

Both Microsoft and RedHat have already stopped developing software for Itanium. HP CEO Leo Apotheker made no mention of Itanium in his long and detailed presentation on the future strategic direction of HP.

Oracle will continue to provide customers with support for existing versions of Oracle software products that already run on Itanium.

So the question which only Oracle knows the answer to is whether or not this decision was in any way influenced by the fact that HP is heavily reliant on Itanium and the moreover the fact that via the Sun acquisition, HP and Oracle are now major competitors.

What is clear however is that industries are at the mercy of companies who roll up industries and this rivalry can in no way be good for any customers. That is unless of course Sun and HP compete via innovation – and this spat in particular shows that for the moment the situation is more of a feud than a rivalry to outdo one another with better products.

Update June 16, 2011: It turns out HP has now filed a lawsuit against Oracle and here is an excerpt from an article written by Ed Silverstein or TMCnet:

“We believe that this is an unlawful attempt to force customers from HP Itanium platforms to Oracle’s own platforms,” HP said in a statement quoted by AFP. “We will take whatever legal actions are available to us necessary to protect our customers’ best interests and the significant investments they have made.”

In Memory of CNBC Anchor Mark Haines

2011-05-25T14:39:06Z

CNBC anchor Mark Haines is dead at age 65 and as an avid CNBC watcher, I have learned from Haines for a few decades and when I found out about his passing I was greatly moved. I felt like I had a personal connection - even though I never met the man. He brought a passion and enthusiasm to financial journalism - he was smart, quick on his feet, balanced and came across as humble.

All this and he was somehow able to tell it like it is without coming across as harsh or prickly.

A few things which made Mark famous are the Alan Greenspan briefcase indicator and the Haines Bottom which he called around the exact time of the recent market bottom a few years back.

The financial markets just lost a great and well-respected member of their community and my condolences go out to the Haines family and his fine coworkers at CNBC.

3Jam Purchased - is it Skype?

2011-05-04T16:33:52Z

The news just broke on TMCnet that 3Jam was purchased - and potentially by Skype. Interesting news as I have written about how TMC uses 3Jam at ITEXPO to coordinate our management team and communicate rapidly between groups. The beauty of the service is it allows you to text to a group and have a single virtual SMS number you respond to which forwards messages to everyone in the group.

Interestingly David Gurle of Skype - General Manager and Vice President of its Skype for Business unit is keynoting the next ITEXPO in Austin, Texas Tues, Sept 13, 2011 at 4:30 PM. It will be interesting to get his thoughts - of course by then the details of the purchaser will most likely be out.

Oh and one bit of concern is the news that the service will soon be shut down - hopefully the acquirer will continue it. Here is an open letter from Enlai Chu, CEO, 3Jam.

May 2, 2011

Friends,

We are happy to announce that the intellectual property underlying 3jam's products and services have been purchased.

Since launching 3jam in 2006, we've appreciated all of the enthusiasm of our users, partners, and investors who have supported our service and helped us grow to nearly four million users globally!

We are proud to be one of the first companies to launch group messaging and a virtual number product that has enabled people to bring their landline and wireless numbers into the cloud. 3jam has been committed to providing innovative and efficient ways for people to communicate, and we are looking forward to seeing these technologies further developed and delivered in a new strategic direction.

3jam's web site and service will be shut down in the coming months, with details on that transition plan to be provided at a later date. Please stay tuned.

Voice Carrier Wants a Big Piece of the SMB VoIP Pie

2011-04-14T22:48:27Z

The business VoIP market has a tremendous amount of growth potential based on a recent FCC report I highlighted last week. And perhaps the most exciting aspect of the market is there is no single leading player which comes to mind – especially for the SMB. And losing and gaining marketshare in the segment can be done quite rapidly if you aren’t careful. Case in point are Comdial and Inter-Tel: two major players in the SMB CPE space just a decade-and-a-half ago.

Comdial was purchased by Vertical – along with a number of other CPE communications companies/PBX vendors and a branding and marketing vacuum the likes which I don’t recall ever seeing has resulted in a stock price which was at over $20 a decade ago and now 1.5 cents per share with a market cap under a million dollars. To be fair, Comdial had major problems before the acquisition so there is lots of blame to go around with regards to this company’s management over the past decade plus.

Mitel and Inter-Tel were two other big CPE players in the market in the nineties and the two companies have combined into a single entity which remind us that so many acquisitions fail. Mitel has given up 2/3 of its value in less than one year in fact. One of the beneficiaries of SMB marketshare gains has been ShoreTel – a relative newcomer to the space but one that understood how integral consistent branding is when coupled with ease-of-use.

Then there was Nortel – by now we all know what happened with this company. And even mighty Microsoft fumbled when getting passed the SMB PBX football – remember Response Point?

I have done my best to build a case as to why new companies can come into the small business communications space and become successful. And this sets us up well as I recently had a conversation with Gary Johnson, President and CEO of Voice Carrier (news). Formerly Ring Carrier – the company changed its name to avoid confusion with a competitor. Moreover – they tell me they are being aggressive and are serious about growing in the small business communications space.

One of their differentiators is they have developed their own technology – which they believe is more reliable than other solutions and moreover, because they own it, they are able to price their solutions more vo.

When I pressed for other differences I was told quality, reliability and long list of functions equal to or better than others. Moreover there is in-country 24x7 tech support as well as pricing which corresponds to concurrent lines as opposed to one line per user.

For example you can have an eight-extension PBX and pay for three lines (assuming that is all you need at once) and $2 per month for each DID. I am told a typical customer uses 2-4 concurrent lines with ten extensions. In addition, there is a built-in IVR, recording, whisper making this system useful for contact centers.

You also get find me/follow me functions and can use star codes to transfer calls picked up on a cell phone to other PBX users. SIP clients can be used meaning an iPad or iPhone can be used as a client and there is a dashboard where you can see system status, who is online, how many calls are in queue and other functions you may expect in a contact center.

There is also server and geographic failover which is certainly important. They actually have a patent-pending on their approach. And their technology is a blend of open-source and proprietary glue which binds together what they tell is me are best-in-breed components.

The company thinks its costs are significantly lower than others in the space and if they are accurate, gives them a significant advantage as they can promote themselves and still provide a solution which is as cost-effective as others or even cheaper.

I can’t tell you what company will be the next big thing but the passion meter was off the chart listening to Johnson speak and moreover he has been involved in a slew of tech IPOs in the past and generally that is a great sign of potential future success.

The SMB cloud communications space is certainly growing and we can expect it to continue its rapid ascent. That means Voice Carrier has tremendous potential to grow if they can deliver on their promise to deliver a quality service at a reasonable price.