Tag Archive for Business

| February 6, 2020
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VMware Had a Bad Week

VMware Had a Bad WeekVMware (VMW) had a bad week last week. First, a  jury in the U.S. federal district court for the District of Delaware ruled that the virtualization giant infringed on two patents owned by Densify. Densify is a Toronto-based startup that makes cloud and container resource management software. The ruling will cost VMware about $237 million dollars. Of course, VMware will appeal.

VMware logoIn an emailed statement, to sdxcentral VMware wrote, “VMware intend[s] to vigorously pursue all legal remedies that are available to us to prove that we are not liable here.”

Next, it was announced that over 200 VMware employees will lose their jobs as part of a “workforce rebalancing.” TargetTech noted that IBM has historically used the same term to describe its periodic layoffs.

In addition to workers losing their jobs, the VMware executive suite has undergone purging too. Reports are that

  • VMware Executative layoffsChief Customer Officer Scott Bajtos, an 11-year VMware veteran who oversaw VMware’s global services team which includes customer success, technical support, professional services support, and customer advocacy.
  • Mark Ritacco, VP of operations and customer intelligence, after almost 11 years,
  • Kate Woodcock, VP of customer advocacy, after almost eight years.
  • Scott Bajtos – global chief customer officer, is leaving after 11 years.
  • Alexa Erjavic, senior director of global services strategy.

VMware acquisitions

Could it be buyer’s regret? Not even cutting a handful of executive salaries can cover the billions VMware has spent on acquisitions over the past 2 years.

In 2018 VMware bought:

  • billions VMware has spent on acquisitionsE8 Security for machine learning (ML) and Artificial Intelligence (AI) for cybersecurity intelligence and analytics.
  • CloudCoreo to manage cloud configurations and identify risks when deploying public clouds to prevent breaches and compliance violations.
  • EMC Service Assurance Suite for monitoring telco network health, performance, and root cause analysis.
  • CloudHeath for multi-cloud management platform across Amazon Web Services (AWS), Microsoft Azure and Google Cloud Platform (GCP) for $500 million.
  • Heptio VMware plans to use Heptio assets to enhance Kubernetes life-cycle management $550 million.

In 2019 VMware bought:

  • VMwareacquisitions over the past 2 yearsAetherPal for remote IT support software to remotely view, control, troubleshoot, and fix devices and applications.
  • BitFusion to support Artificial Intelligence and machine learning-based workloads on graphics processor units (GPUs) (no acquisition price announced).
  • Uhana for 5G mobile network optimization.
  • Intrinsic for secure serverless functions on AWS, Azure, and GCP.
  • Bitnami brings simplified app development with a curated marketplace for VMware customers.
  • Veriflow for network monitoring software for multi-cloud management.
  • Avi Networks for multi-cloud application delivery to enhance performance, resource utilization, automation, and scalability.
  • Pivotal for multi-cloud application software strategy across AWS, Azure & GCP for $2.7 billion. and;
  • Carbon Black to provide an enterprise-grade security platform to protect workloads, applications and networks from device to cloud for $2.1 billion.

Already in 2020 VMware bought:

  • Nyansa to provide network traffic analytics that covers the SD-WAN and the wired and wireless LAN.

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While the hyper-scale cloud vendors AWS, Azure, GCP, and the Chinese giants battling it out for cloud supremacy. Most enterprises have adopted a multi-cloud strategy. VMware is in the incumbent position as it competes with IBM, maybe Cisco, and HPE to be the glue that binds private and public clouds as well as owned data centers into an enterprise multi-cloud strategy. This is a long-term play.

In the near term – all of the acquisitions since 2018, VMware does not have a lot to show for it financially. VWM has been basically flat. VMW spiked to $150.00 in January 2018, hit a peak of $203.64 in, 2019 and has settled back to $157.50 in February 2020.

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Ralph Bach has been in IT long enough to know better and has blogged from his Bach Seat about IT, careers, and anything else that catches his attention since 2005. You can follow him on LinkedIn, Facebook, and Twitter. Email the Bach Seat here.

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| November 7, 2019
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Xerox May Buy HP

Updated 02/27/2020 – HP has returned fire on the heels of beating Wall Street expectations for ‘Q1 20. HP announced a “value creation plan” to return $16 billion to shareholders to fight the hostile takeover bid from Xerox. This will come in the form of HP stock buybacks and dividends powered in part by cost-cutting.

But Xerox has not backed down and plans to launch a tender offer starting “on or around” March 2, which will ask all HP shareholders to sell their shares to Xerox.

There is now speculation that HP could buy out Xerox.

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Updated 02/10/2020 – Xerox has fired another salvo in its hostile take-over attempt of HP. CNBC is reporting that Xerox has boosted its offer for HP Inc. to $34 billion (from $22 to $24 a share). A billion here, a billion there, and pretty soon you’re talking about real money.

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Updated 01/24/2020 – “People familiar with the matter” are saying the HP share-holder Xerox plans to nominate up to 11 people to the 12-person HP Inc. board of directors as the next step in its hostile takeover bid of HP, 2019’s global PC sales leader.

In response, HP publicly called out billionaire activist shareholder Carl Icahn. In a presser, HP claimed Mr. Icahn’s interests were not aligned with those of other HP shareholders.“Due to Mr. Icahn’s ownership position, he would disproportionately benefit from an acquisition of HP by Xerox at a price that undervalues HP.” Mr. Icahn owns about 11% of Xerox and a representative for Icahn wasn’t immediately available for comment to Yahoo.

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Updated 12/10/2019 – And the story goes on – Xerox CEO John Visentin is meeting with some HP shareholders to walk them through the key points of the proposed acquisition. In what it describes as “undisputed” logic. ZDNet has some of the slides.

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Updated 11/25/2019 – This morning, HP rejected Xerox’s follow-up demand to either agree to formal merger talks otherwise, Xerox would present a “compelling case” for a buy-out directly to HP shareholders. Seems a proxy fight is brewing with activist contrarian investor Carl Icahn holding shares on both sides of the deal.

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Updated 11/17/2019 –  HP’s Board of Directors has unanimously rejected Xerox’s bid to acquire HP. But, HP did not completely shut down Xerox’s efforts to merge the two aging tech giants.

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Xerox May Buy HPHP inc. could be bought out on the heels of its second round of layoffs in 15 months. According to reports, Xerox (XRX) sent a buyout proposal to HP Inc. on November 5. The PC giant confirmed the offer on 11/06/2019. HP issued a vague statement that reads in part;

Xerox logo… we have had conversations with Xerox Holdings Corporation (XRX) from time to time about a potential business combination. … We have a record of taking action if there is a better path forward and will continue to act with deliberation, discipline, and an eye towards what is in the best interest of all our shareholders.

The ambiguous HP (HPQ) statement may be a ploy to bring additional bidders to the negotiating table. Norwalk, CT-based Xerox is reportedly backed by Citigroup Inc. CRN reports that Xerox is set to gain $2.3 billion by selling its 25% stake in the Fujifilm Xerox joint venture.

HP logoBloomberg claims that remaining independent is only going to become more difficult for both HP and Xerox. Gartner predicts that global printer shipments set to decline by 2% annually through 2023. Teaming up would reduce costs and competition in the segments where they overlap; HP is generally stronger in the market for smaller printers, while Xerox holds the lead in larger ones. That could boost profitability even as revenue stagnates.

A Xerox-HP merger would result in significant job reductions around the world as the new company would seek to cut costs through the elimination of back-end costs associated with supply chain, finance, HR, and other OPEX expenses. The impact on the two companies’ respective channels would be most felt in the printer segment, where there’s the greatest overlap. Another likely outcome is the spin-off of HP’s 3D printing division, which is not core to either of the companies.

So how did we get here? Xerox is still finding its way after splitting from its professional services business in 2016, which formed the new business Conduent, and the failed merger with FujiFilm in 2018. Xerox relies on a dying business for the bulk of its sales and profit. It sells and services copy machines and printers, primarily for corporations. But sales are falling, declining for the past seven quarters.

HP announced plans to reduce headcount by as much as 9,000, or 16% of its 55,000 employees. The staff reductions, through layoffs and voluntary early retirement, are expected to be completed by the fiscal year 2022. In June 2018, the company laid off 5,000 employees over several months.

HP's struggles in the printer and printer supplies businessWhile HP appears to be holding its own in the PC space — both Gartner and IDC place HP Inc. in second place behind Lenovo for unit shipments as of this 2019 Q2. HP’s ongoing struggles in the printer and printer supplies business, where HP has long been the market leader, has been under stress from third-party suppliers selling toner and ink at significantly lower prices. Reports are that HP’s printer business accounts for a whopping 75% of its total profits and roughly half of its total revenues.

Xerox started in 1906 as the Haloid Photographic Co. The photographic supply company in Rochester, NY, paved its way to mega-success in March 1960, when it shipped its first office copier. The Haloid Xerox contraption was the size of two washing machines and weighed 648 pounds. It also occasionally caught on fire. The Xerox copier’s core technology -— a process called xerography, invented by Chester Carlson — is still widely used in copy machines five decades later.

HP traces its origins to 1938 when Bill Hewlett and Dave Packard rented a garage in Palo Alto, CA. That year, they invented their first product: the HP Model 200A, an audio oscillator used to test sound equipment. The company became the pioneer of Silicon Valley, building its first computer in 1966 and the famous HP-35 in 1972 — the world’s first hand-held scientific calculator. Hewlett-Packard, split into two companies in 2014. HP Inc. got printers and PCs. HP Enterprise got servers and enterprise software.

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Marketwatch has some good data on why these firms are planning to hook up. They write that globally consumers will print 210 billion pages, down 20% from 2015. In 2018, U.S. consumers printed an average of 38.4 pages a month, down 40 pages per month in 2017. In addition to printing less, U.S. consumers have purchased 11% fewer inkjet printers so far in 2019.

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Ralph Bach has been in IT long enough to know better and has blogged from his Bach Seat about IT, careers, and anything else that catches his attention since 2005. You can follow him on LinkedIn, Facebook, and Twitter. Email the Bach Seat here.

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| May 1, 2019
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Mitel – Avaya Hook Up?

Updated August 28, 2019 – Rumors confine to swirl about the future of Avaya. Channel Partners is reporting there are 2 offers on the table. They cite reports from Bloomberg that Avaya is considering a bid by Mitel and Reuters is reporting that Avaya is considering an all-cash offer from private equity firm Clayton Dubilier & Rice.

Channel Partners speculates that the Mitel-Avaya deal would “…result in a company with a market share that would rival key industry players Cisco and Microsoft.”

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Avaya buy-out rumors are back. Last month it was thought that a PE firm, possibly Searchlight Capital Partners was going to buy Avaya. The unknown private equity firm valued Avaya at more than $5 billion, including debt.

The newest report is that Ottawa-based Unified-Communications-as-a-Service provider Mitel is looking to acquire Avaya in an all-stock merger valued at between $2.2 billion and $2.4 billion, according to The Wall Street Journal.

The reported deal would value communications equipment and software provider Avaya at $20 to $22 per share, a premium based on its current stock price of about $18 per share on Monday 04/29/2019. If Avaya and Mitel are able to strike a deal, the merger could happen as soon as next month, the WSJ said, citing mysterious people familiar with the matter.

compete against their larger UC competitorsCRN says that the Avaya-Mitel deal could help the two companies compete against their larger UC competitors. Mitel typically plays well in the small to midsize market, while Avaya has a large install base of enterprise customers because of its legacy in the UC hardware arena.

Zeus Kerravala at NoJitter points out that the reported $2 billion purchase price doesn’t into account Avaya’s roughly $3 billion in debt. With debt included, the offer would have to come in for a total enterprise value of $5 billion to be of interest to shareholders.

Mr. Kerravala believes that a successful merger between Avaya and Mitel would create a behemoth of a company, bringing the number two and number three voice vendors together. He cites Synergy Research Group data that shows Cisco (CSCO) the leader with about 44% market share, Avaya second at 10%, and Mitel third at 8%. He believes a combined Avaya and Mitel would hold the industry’s biggest installed base.

Synergy enterprise voice market share estimate

Source: Synergy Research Group

The merger would also be beneficial as the industry becomes more artificial intelligence (AI)-centric, data and scale are must-haves. Mr. Kerravala believes Avaya and Mitel are stronger together than apart on AI. That said, if a deal doesn’t happen, the companies should still be fine continuing down their current trajectories, optimizing their internal resources while leveraging partners for AI. They can still do this, although it would be easier as a bigger company.

private equity firm Searchlight Capital PartnersAn investment group led by private equity firm Searchlight Capital Partners acquired Mitel in April 2018 with a $2.6 billion deal that took the company private. Mitel has a history of growing via acquisitions. In 2017 the company completed the acquisition of competing UC provider ShoreTel for $530 million. The move helped Mitel become one of the largest UCaaS providers in the world. The company lost out on its deal to acquire videoconferencing provider Polycom in 2016 to Siris Capital Group.

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This is just more of the same for Avaya. The crowning jewel in this deal is Avaya’s corporate call center business. Avaya’s call center business is the product of the acquisition of Nortel assets, after the Canadian networking giant’s bankruptcy in 2009.

This deal is really about the cloud. TechCrunch notes that Searchlight has a strategic stake in Rackspace, another legacy company that it took private for $4.3B in 2016.

Will Searchlight leverage its investments in Rackspace, Mitel, and now Avaya to build a cloud-based UCaaS juggernaut to take on the likes of Cisco, Microsoft, Slack, RingCentral, 8×8, even Google and Amazon?

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Ralph Bach has been in IT long enough to know better and has blogged from his Bach Seat about IT, careers, and anything else that catches his attention since 2005. You can follow him on LinkedIn, Facebook, and Twitter. Email the Bach Seat here.

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| April 8, 2019
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Chapter 11 Reboot for Sungard AS

Updated 11/18/2022 –  11:11 Systems has completed the acquisition of Sungard Availability Services’  Recovery Services and Sungard AS’ Cloud and Managed Services business’.

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Updated 05/08/2019 – Sungard AS emerged from bankruptcy on 05/07/2019. The firm’s turnaround is described as the fastest pre-negotiated restructuring in US corporate history. The result is Sungard AS debtors having taken an $800 million haircut, the recovery service received $100 million of new liquidity from its creditors and a new CEO.

The firm’s new ownership and largest shareholders now include Angelo, Gordon & Co., LP; The Carlyle Group Global Credit; FS Investments and GSO Capital Partners LP.

However, the quick fix did not solve the problems that forced the firm into bankruptcy, as described below.

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Data infrastructure and disaster recovery company Sungard Availability Services (AS) announced it was filing for bankruptcy on April 01, 2019. Sungard AS, which helped keep Wall Street running through 9/11, says its customers include 70 percent of Fortune 100 companies. It boasts 90 hardened IT facilities connected by a redundant, dedicated network backbone, along with 18 mobile facilities staged in strategic locations is saddled with hefty debt from its private equity backers.

Sungard ASIn addition to a huge debt load, the once high-flying Pennsylvania-based firm faces falling margins as it struggles with growing competition from cloud rivals amid a shift away from on-premises/co-location backup. These factors forced the firm to seek relief from the courts.

The Sungard AS Chapter 11 plan is expected to be filed in New York during May 2019. The bankruptcy plan reportedly includes a write-off $800 million of the company’s $1.25 billion debt. Chapter 11 protection is a part of the US Bankruptcy Code that allows a company to reorganize its assets while handing over the business operations of the company to its debtors.

Sungard AS locations

Under the Chapter 11 proposal, hedge fund creditors that specialize in turnarounds and liquidations, sometimes dubbed “vulture capitalists” — including Blackstone Group’s LP’s GSO debt investment unit, Angelo Gordon & Co., Carlisle Group, and Contrarian Capital Management — will take control of Sungard Availability.

The hedge fund will replace the buyout investors who bought the formerly publicly traded company for $11.4 billion in 2005. The original private equity sponsors include: — Bain Capital, Blackstone Group, Providence Equity Partners, KKR & Co., Silver Lake Management, and Texas Pacific Group (TPG) Capital.

Wall Street street signDespite claims that most creditors back the bankruptcy plan and that Sungard AS would emerge from the wreckage a stronger, more competitive business, the move rocked the industry. Hedge funds are not typically long-term investors causing alarm among SunGard AS employees about the company’s future. Employees fear the company will be asset-stripped and not survive, as hedge funds seek to recoup money lost on the debt haircut. Sungard AS insists that won’t happen. Sungard employs over 3,000 people according to its website.

Sungard AS’s data center model, “shared infrastructure,” of physical locations for backup IT systems, has become outdated as cloud-based infrastructure, led by Amazon Web Services, and Microsoft Azure have grown to dominate firms’ IT backup operations.

Andrew A. Stern, Chief Executive Officer, Sungard Availability Services said.

There’s no question the shift to cloud is part of what’s challenged us. But even before the cloud, by the late 2000s, “the approach the company had taken to disaster recovery really hadn’t changed in 20 years — and the world had moved on. … We had been slow in recognizing the business had to change.

Data center issuesSungard initially tried to meet rival remote-server “cloud”-based systems with its own “private cloud” solutions. But its large corporate clients by 2016 were migrating to the large, secure cloud systems maintained by Amazon, Microsoft, and other giant companies. CEO Stern added, “We suddenly found ourselves competing with much bigger environments at much greater scale.”

Sungard couldn’t beat them, so it signed up as one of 130 Amazon-audited managed service partners, recruiting and customizing Amazon Web Services for corporate disaster-recovery customers, including, most recently, government agencies in England. Mr. Stern added, “But that change has taken time.”

Philly.com summarizes Sungard’s history. Sungard’s lineage starts in the mainframe days. It started off as Sun Information Systems, founded in the 1970s as a backup for early data systems at oil and chemical plants run by the former Sun Oil Co. In the 1980s, founder John Ryan diversified the company, offering backup services to banks as they computerized deposit, loan, and investment records. In the tech boom of the late 1990s, publicly-traded SunGard Data Systems was worth more than Sun Oil’s parent company, Sunoco.

During this time SunGard Data acquired competing systems in the same market sector and let them continue competing for a time. In the late 1990s then-chief executive, Cristobal Conde began combining SunGard products into large groups focusing on recovery (Availability) and was using its profits to buy dozens of financial, government, and college software services across Europe and Asia, and North America.

The 2005 acquisition of SunGard Data by the buyout firms was one of the biggest deals of its kind before the 2008 financial crisis. In 2011 sales peaked at over $5 billion and employment topped 20,000.

Mainframe computerBut with its owners mostly concerned with pulling cash out of the company, it lost what its leaders admitted was a “tsunami” of corporate customer cancellations as the disaster-recovery market changed, and the company didn’t keep up. In 2011, SunGard Data sold its main college business to Virginia-based Ellucian for $1.75 billion.

In 2014 SunGard Data split in two. In 2015 the larger SunGard Data Systems Inc., with sales of $2.8 billion was sold for $5.1 billion to Florida-based Fidelity Information Services. As a standalone unit, Sungard AS struggled to gain profitability leading to the bankruptcy announcement.

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Indeed the Cloud has significantly changed disaster recovery in multiple ways.

The hyperscale cloud providers like AWS and Microsoft Azure have entered the market as both competitors and partners.

Cloud disaster recovery has changed the way disaster recovery services are delivered adding flexibility and remote working.

We have seen the same thing with the demise of KMart and Sears. Sungard was still reliant on brick-and-mortar DR services.

Let’s see how many Sungard AS customers will continue to invest the DR dollars into a company whose CEO admits they “hadn’t changed in 20 years” and is willing to write off almost a billion dollars.

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Ralph Bach has been in IT long enough to know better and has blogged from his Bach Seat about IT, careers, and anything else that catches his attention since 2005. You can follow him on LinkedIn, Facebook, and Twitter. Email the Bach Seat here.

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| December 10, 2018
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Please Take Lotus Notes

Please Take Lotus NotesIn a move to free up some cash and make room for its $34 billion acquisition of Red Hat Inc. (RHT), IBM (IBM) is selling off its enterprise software business for $1.8 billion to HCL Technologies.

Please Take NotesHCL Technologies is global services company valued at $8 billion. India-based HCL operates out of 43 countries, serving the financial services, manufacturing, telecommunications, media, publishing, entertainment, retail, and other industries.

Lotus Notes

The sale includes most of IBM’s enterprise business, including Lotus Notes and Domino collaboration software, network management software Tivoli, and other titles. Lotus Notes was developed by Mitch Kapor in 1989 and was a pioneering enterprise software tool that swept the market with features such as email and collaboration workspaces, that we now take for granted.

Lotus 1-2-3 for DOSLotus, founded in 1982, rose to fame in 1983 with the Lotus 1-2-3 spreadsheet, which drove the popularity of freshly minted IBM PC. IBM took over Lotus for the then astounding sum of $3.52 billion. IBM looked to the Lotus acquisition to change its white-shirt-and-tie culture to embrace the MTV age and the new Internet.

Lotus Notes and Domino ranked among the top client-server groupware and email systems in the 1990s, competing head-on against Microsoft Exchange. While Microsoft successfully migrated Exchange to Office 365 in the cloud, Notes and Domino largely missed the cloud era.

Lotus NotesBig Blue acquired Tivoli for $743 million in 1996. It ranked among the leading IT management software providers, competing against CA Technologies, BMC, and HP in the 1990s and early 2000s. Each of those companies stumbled in recent years — opening the door for ServiceNow to disrupt major portions of the market.

The IBM world-view

The HCL deal highlights IBM’s failure to navigate the shift from client-server to SaaS. Lotus Notes stayed a client-server system and lost business to Amazon Web Services (AWS) and Microsoft Azure and Google Cloud Platform.

Now that the business has been lost, IBM is moving in a different direction. Older software like Lotus Notes and Domino don’t really play a role in the new IBM world-view. One IBM solution provider told CRN, “I can understand getting rid of Lotus Notes and Domino Microsoft Office 365 and Google Apps are killing the hell out of Lotus Notes. ”

In addition to Lotus Notes, Domino, and Tivoli, the IBM Software asset sale to HCL includes:

  • IBM Appscan, a security-focused application for identifying and managing vulnerabilities in mission-critical applications;
  • IBM BigFix endpoint management and security software;
  • IBM Unica, a cloud-based enterprise marketing automation software; and
  • IBM WebSphere Commerce, an omnichannel commerce platform for B2C and B2B organizations.

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While I am the PM on our move off of Notes to SaaS products like O365, every once in a while I find myself saying that Notes worked well. But then I remember that it is overly complex and proprietary. The client software is huge and bloated and lacks a simple client.

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Ralph Bach has been in IT long enough to know better and has blogged from his Bach Seat about IT, careers, and anything else that catches his attention since 2005. You can follow him on LinkedIn, Facebook, and Twitter. Email the Bach Seat here.

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