DailyFinance.comhttp://www.dailyfinance.comDailyFinance.comhttp://o.aolcdn.com/os/df/2013/img/2-dailyfinance_logo_m.pngDailyFinance.comhttp://www.dailyfinance.comen-usCopyright 2013 Weblogs, Inc. The contents of this feed are available for non-commercial use only.Blogsmith http://www.blogsmith.com/Gevo: Richard Branson's New Age Chemical Company Goes Publichttp://www.dailyfinance.com/2011/02/10/gevo-ipo/http://www.dailyfinance.com/2011/02/10/gevo-ipo/http://www.dailyfinance.com/2011/02/10/gevo-ipo/#commentsFiled under: , , , ,

Sir Richard Branson never stops thinking up new breakout ideas. His Virgin Group has over 400 companies, ranging from airlines to mobile phones to space tourism. The experimentation seems to have worked -- Branson himself is worth about $4 billion.

One of his companies, Gevo (GEVO), went public this week on Nasdaq. The firm sold 7.15 million shares at $15 each, which was at the high end of its estimated range of $13 to $15. On its first day of trading, the stock shot up about 16%.

A Viable Energy Alternative?

Gevo, based in Englewood, Colo., develops bio-based alternatives to petroleum products. It plans to produce isobutanol, which is an alcohol compound that can be used as a gasoline blendstock and for the production of plastics, rubber or polyesters.

Petrochemicals are products made from energy compounds, like coal, natural gas or fossil fuels. These sources have drawbacks, especially considering their impact on the environment. At the same time, crude oil is getting tougher to find.

Sponsored Links
Isobutanol appears to be a viable alternative. Its costs tend to be less volatile, and it's environmentally friendly.

But there are some problems. Perhaps the toughest is the expense of building a new infrastructure. Gevo has hit on a smart approach to this -- leveraging the existing energy system. This means developing isobutanol to be used in existing ethanol plants, pipelines and refineries. And Gevo has put together a sophisticated system -- GIFT -- for this process. The result is a high-energy yield and a low cost, both critical for any alternative energy source.

And Gevo is getting traction. Already the company has received interest from potential customers like Lanxess, a top chemicals company and Total Petrochemicals USA.

No Hurry for Investors

While Gevo has a great business plan, it is far from foolproof. The retrofit process will not be easy. Plus, it will take time to get the petrochemicals industry interested in the new technology.

Even though Gevo was able to raise $107 million, that may not be enough. Keep in mind that since 2005, the company has sustained losses of $77 million.

Gevo won't launch its product until the first half of 2012, which means there's no need for investors to rush into this stock. As time goes by, there should be opportunities to get shares at a lower price.


Permalink | Email this | Comments

]]>biofuelGevoGevo goes publicinitial public offeringIPOsIsobutanolpetrochemicalRichard BransonTom TaulliThu, 10 Feb 2011 12:15:00 ESTRPX's Plan: Make a Fortune by Fixing the Patent Messhttp://www.dailyfinance.com/2011/01/25/rpx-fixing-the-patent-mess/http://www.dailyfinance.com/2011/01/25/rpx-fixing-the-patent-mess/http://www.dailyfinance.com/2011/01/25/rpx-fixing-the-patent-mess/#commentsFiled under: , ,

Despite the negative talk, the U.S. is still a dominant leader in innovation and technology. From 1991 to 2000, 303,220 patents were filed. Then from 2001 to 2010, this increased to 682,086. Consider that over 250,000 active patents exist just for smartphones, which are constantly adding new features and technologies. The U.S. patent system is clearly getting ever more complicated and expensive -- trends that aren't likely to end anytime soon.

This has created an open for an opportunistic group of firms called "nonpracticing entities," or NPEs. A more common moniker is "patent trolls" or even "patent pirates." These companies buy patents and then try to get licensing fees from companies through litigation. No doubt, this can be a heavy cost for tech companies that are trying to compete.

That has led a company called RPX to work on a solution to this big problem. As a sign of its success, it has filed for an IPO, even though it was founded only in 2008. The lead underwriters include Goldman Sachs (GS) and Barclays Capital (BCS). The main investors are Index Ventures, Charles River Ventures and Kleiner Perkins Caufield & Byers.

Enter "Defensive Patent Aggregation"

The patent marketplace is enormous, but it lacks many features that would make it efficient. There's no central exchange or standardized terms for making transactions. Basically, pricing is often based on litigation.

Sponsored Links
Realizing that the status quo will continue for some time, RPX has developed a business model that helps minimize the risk. It's called "defensive patent aggregation," and it requires monitoring developments in intellectual property.

When certain patents look strategic, RPX will buy them. So far, it has spent over $250 million on these investments.
But RPX's policy isn't to litigate over these patents. Instead, it gets annual subscriptions from clients in exchange for access to the information and the right to further develop protection strategies. A key attraction is that RPX caps its fee based on a client's revenue and operating income, with adjustments based on the consumer price index. This helps to align the interests of the clients with RPX.

So far, the system is working well. In 2008, RPX added five clients. But by 2010, it had 47 additions. Among its clients are Cisco (CSCO), Google (GOOG), Samsung Electronics, Verizon (VZ) and Panasonic.

Lots of Interest

So, it's no surprise that RPX has been growing at a torrid rate. In 2008, it generated $800,000 in revenues. As of the first nine months of 2010, revenues soared to $65.2 million and net income came to $10 million.

While the RPX offering may not be as big as a Facebook IPO, it's likely to get lots of investor interest. And with the proceeds, it'll be able to greatly improve its patent portfolio, raising the barriers to entry for would-be rivals.

Permalink | Email this | Comments

]]>ipopatentpatent infringementpatent lawsuitpatent piratepatent trollRPXus patent officeTom TaulliTue, 25 Jan 2011 12:00:00 ESTIs NeXt a Better Way to Buy Into Facebook Before the IPO?http://www.dailyfinance.com/2011/01/12/next-facebook-ipo-invest-closed-end-fund-shares/http://www.dailyfinance.com/2011/01/12/next-facebook-ipo-invest-closed-end-fund-shares/http://www.dailyfinance.com/2011/01/12/next-facebook-ipo-invest-closed-end-fund-shares/#commentsFiled under: , , ,

Is NeXt a Better Way to Buy Into Facebook Before the IPO?Over the next couple years, it looks like a bumper crop of top-flight social networking companies will hit the IPO markets, among them Facebook, LinkedIn, Groupon and Zynga. Of course, Goldman Sachs (GS) has already started angling for the Facebook offering by investing $450 million in the company. There was also a $1.5 billion allocation for its clients, requiring a $2 million minimum buy-in.

It's just another proof of the old saying: "The rich get richer." Ordinary investors will have to wait until after Facebook goes public -- when the price is likely to be at much higher valuations.

Or will they? Do you really have to wait for the IPO to get in on the action?

It's already possible to buy pre-IPO shares through online marketplaces such as SharesPost and SecondMarket. But the liquidity is often lacking -- resulting in higher costs -- and it can easily take a month to complete a transaction.

Soon, though, there may be an alternative. Several Silicon Valley veterans are creating a new fund called NeXt BDC Capital. The goal is to raise $50 million in capital and trade on Nasdaq under the symbol "NEXT."

A Look at NeXt Capital

NeXt Capital will be structured as a closed-end mutual fund. This means there will be a fixed number of shares and investors won't necessarily be able to redeem their holdings at the fund's net asset value (NAV) -- which is the value of the portfolio minus the expenses and any liabilities. It's common for closed-end funds to trade at a discount to their NAV, for reasons including operating expenses and liquidity problems.

The focus of the NeXt Capital portfolio will be on top-quality venture-backed firms, with investments in common and preferred stock as well as warrants. At the start, it will hold stakes in between 15 and 30 such companies.

In such a venture, a strong management team is critical to success, and NeXt Capital certainly has one. The president is Michael Moe, a co-founder of ThinkEquity, an investment banking firm focused on early-stage companies. Prior to that, he was the head of global research at Merrill Lynch (BAC). And, he's the author of the book, Finding the Next Starbucks: How to Identify and Invest in the Hot Stocks of Tomorrow (Penguin/Portfolio Books, 2006).

Other key managers at NeXt include Stephen Bard and Luben Pampoulov, who have a combined 50 years of investing experience between them. Their backgrounds include research, investment management and private-company investments. These portfolio managers are also involved in NeXtUp, a research firm that has proprietary coverage on more than 30 privately held companies including Twitter, LinkedIn, Zynga and Bloom Energy.

What to Expect?

For years, IPOs have been in a serious drought. From 2001 to 2010, there were only 422 venture-backed deals. This compares to 2,728 transactions between 1991 to 2000. So there is likely to be pent-up demand for public offerings.

Sponsored Links
Investing in a fund like NeXt Capital is an interesting way to play this. It provides diversification and day-to-day monitoring. More importantly, the NeXt Capital could see lots of price appreciation as its portfolio companies begin to hit the IPO market, which is likely to happen in the second half of this year.

Yet investors should still be cautious. There were a variety of venture-type funds such as CMGI back in the dot-com days. While they performed extremely well when the Nasdaq was surging, they quickly fizzled when the markets plunged. In other words, an investment in NeXt Capital is likely be for those with a short-term horizon.


Permalink | Email this | Comments

]]>closed-end fundsdot-comdot-com bustFacebookFacebook stock market valuationgrouponipolinkedinliquidityLuben PampoulovMichael MoeNASDAQNext BDCNext CapitalSecondMarketSharesPostStephen BardTwitterventure capitalventure fundsZyngaTom TaulliWed, 12 Jan 2011 15:40:00 ESTLaunched in China, Youku.com's Stock Goes Into Orbithttp://www.dailyfinance.com/2010/12/09/china-youku-ipo-stock-soars/http://www.dailyfinance.com/2010/12/09/china-youku-ipo-stock-soars/http://www.dailyfinance.com/2010/12/09/china-youku-ipo-stock-soars/#commentsFiled under: , , , ,

Have the markets entered an IPO time warp? This week, the activity has been red-hot -- at least for Chinese deals.

Take a look at Youku.com (YOKU). In Wednesday's debut, the company's stock soared 161% to $33.44, raising $203 million. It marked the best return since Baidu (BIDU) hit the markets five years ago.

Then again, Youku.com is the dominant player in the fast-growing online video market in China. Interestingly, the company's name means "excellent and cool." It certainly is for some IPO investors who were able to get shares of the offering.

Where Youku Came From

With an MBA from Stanford, Victor Koo worked at Bain & Co. in San Francisco and then at Sohu, which is the largest Internet portal in China. While in Silicon Valley during the 1990s, he learned the tech trade and cultivated invaluable contacts.

Seeing the huge popularity for YouTube, Koo decided to try replicating that success in China. The result was Youku.com.

Now the site gets a whopping 203 million monthly unique visitors from homes and office. There are also 61 million unique visitors from Internet cafes. It adds up to roughly 40% market share.

YouKu.com is not just about user-generated content. For example, the video library has over 2,200 movie titles and 1,250 TV series. Such content is critical for attracting visitors. And with its growing size, YouKu.com is getting better economies of scale, which gives the company a cost advantage. It also helps that it has a strong video-delivery infrastructure (there are more than 5,500 servers) and that content is licensed at a fixed fee.

Too Hot?

By far, China is the world's largest Internet market, with 420 million users. Of these, 87% are on broadband. And yes, China is also the largest mobile market, with 805 million subscribers.

Sponsored Links
At the same time, China's TV market is highly fragmented and regulated. Keep in mind that only roughly half of the professionally produced movies and series are aired each year on TV and in theaters. Thus, a company like YouKu.com has a big opportunity to aggregate content and monetize a rapidly growing user base.

Because of its strong demographics, the company has attracted 343 advertisers. For the first nine months of this year, revenues came to $35.1 million.

However, the current valuation is certainly at nose-bleed levels. Assuming the company's top line hits $50 million for the year, YouKu.com's shares will be trading at over 70 times revenues. Even for high-fliers in China's frothy market, this is a steep premium for growth. Thus, investors may want to wait some time to get a better value on these shares.


Permalink | Email this | Comments

]]>chinese iposInternet stocksIPOsYouku.comTom TaulliThu, 09 Dec 2010 16:55:00 ESTSalesforce.com Takes a Shot at Oracle with New Database.comhttp://www.dailyfinance.com/2010/12/07/salesforce-com-takes-a-shot-at-oracle-with-new-database-com/http://www.dailyfinance.com/2010/12/07/salesforce-com-takes-a-shot-at-oracle-with-new-database-com/http://www.dailyfinance.com/2010/12/07/salesforce-com-takes-a-shot-at-oracle-with-new-database-com/#commentsFiled under:

One of the best-performing stocks over the past six years has been Salesforce.com (CRM). During this time, its share price has gone from about $10 to $150, with a market cap now close to $20 billion.

CEO Marc Benioff started the company in 1999. Before then, he was an executive at Oracle (ORCL). Benioff soaked up the Oracle experience, but also realized there were many problems with enterprise software. The costs were too high and the applications were extremely complicated. It was not uncommon for companies to spend millions on software that only a few employees would use.

Benioff's idea was to deliver his software via the Internet, which would be become known as cloud computing. What's more, the design would look like Amazon.com (AMZN) or eBay (EBAY). And Benioff started to sell his software using subscriptions. Gone were the high upfront fees.

It represented a megatrend in the software business, although there were still many skeptics. Would companies really allow their data to be stored in the cloud? Well, it looks like the answer is "yes."

So looking to find ways to grow, Salesforce.com is targeting another big market: databases. Its new offering is called Database.com and it looks like a direct challenge to Oracle.

A New War in the Cloud

Since its founding in 1977, Oracle has grown at a staggering pace. Along the way, the company was able to fend off tough competitors, like Sybase. Now, the company is the clear leader in the database management business, with a market value of $146 billion.

In order to bolster its position, Oracle has also spent billions on acquisitions, with a focus on areas like enterprise resource planning and middleware. The company is even moving into hardware (with the Sun deal this spring). Oracle is also a big beneficiary of cloud computing, as it requires large databases to store transactions.

Time for Oracle to Get Serious About Cloud Computing?

As the largest cloud-computing platform, Salesforce.com has the opportunity to provide infrastructure for cloud-computing application developers. No doubt, this will take away some business from Oracle.

In fact, Salesforce.com calls its new offering the "first enterprise database build for the cloud." It's actually the database that powers its own applications. So it is a proven technology that is highly scalable.

Sponsored Links
Another key benefit is that Database.com is open. You can develop in Java, C#, PHP and Ruby. The apps will also operate on platforms like VMforce, Amazon EC2, Google's AppEngine and Microsoft's Azure. Of course, there is integration with the Android, Blackberry, iPad and iPhone.

Database.com will no doubt pose a serious threat to Oracle. After all, cloud-computing is expected to grow at a hefty clip and Oracle does not want to be left out. Actually, it's a good bet that the company will try to come up with its own offering or purchase one.

True, there is little near-term threat to Oracle's core database business. But given the size of the database market -- which is $21.2 billion -- there is much at stake. In other words, it is definitely important for Oracle to finally get serious about cloud computing.


Permalink | Email this | Comments

]]>cloud computingdatabasesoraclesalesforce.comTom TaulliTue, 07 Dec 2010 11:30:00 ESTMellanox Buys Voltaire for $218 Millionhttp://www.dailyfinance.com/2010/11/29/mellanox-voltaire/http://www.dailyfinance.com/2010/11/29/mellanox-voltaire/http://www.dailyfinance.com/2010/11/29/mellanox-voltaire/#commentsFiled under:

Mellanox Technologies (MLNX), a maker of networking chips and switches, has agreed to pay $218 million or $8.75 per share for rival Voltaire (VOLT). The deal is expected to close in the first quarter of 2011.

The M&A activity has been red hot for server and data storage companies this year with large players like Dell (DELL) and Hewlett-Packard (HPQ) paying steep premiums to get a foothold in the sector. After a lull, it looks like the action may have revved up again with this deal.

Staying on Top of Rapidly Changing Technology

Founded in 1997, Voltaire has become a leader in server and fabric switches. These sophisticated technologies allow for improved performance in data centers and even cloud-computing environments.

Voltaire's solutions scale according to a customer's unique needs, such as with standards like InfiniBand or 10 Gigabit Ethernet. It's complex stuff -- and the technology keeps changing. But so far, Voltaire has been able to keep up.

Sponsored Links
The company counts about 30% of the Fortune 100 as customers, including HP, IBM (IBM) and Oracle (ORCL). Voltaire's switches are embedded in these company's blade servers and other systems.

And growth has been strong. In the third quarter, revenue increased 25% to $14.4 million. The annual outlook is for revenue of $67 million to $70 million.

The company has also been showing improvement in cutting back its losses. In the quarter, the operating loss was $618,000, which compares to a loss of $1.5 million in the same period a year ago. Although, operating cash flows was $3.6 million.

Investors Are Skeptical

Despite its strong technology, the stock price of Voltaire has been erratic. Then again, the company has rivals like QLogic (QLGC), Cisco (CSCO), Juniper Networks (JNPR) and Brocade Communications Systems (BRCD).

A merger with Mellanox should give it more heft. The deal will also help with Mellanox's vision to be a leading supplier of end-to-end connectivity solutions for servers and storage.

No doubt, the market opportunity is enormous. A recent study from Gartner forecasts that global server shipments will increase from 9 million in 2010 to 11.2 million in 2014. As for the storage market, worldwide systems are expected to grow from 1.8 million in 2010 to 3.2 million in 2014.

True, investors have some skepticism of the deal as Mellanox's shares are off 4% in Monday morning trading. But the acquisition is not cheap and will take efforts at integration.

Ultimately, Mellanox will eventually itself be buyout bait, with potential suitors like IBM or Oracle. And by adding Voltaire, this may make the company even more attractive.


Permalink | Email this | Comments

]]>acquisitionsethernetMellanoxmergers and acquisitionsVoltaireTom TaulliMon, 29 Nov 2010 11:40:00 ESTExpedia Goes Mobile With Mobiatahttp://www.dailyfinance.com/2010/11/19/expedia-mobiata/http://www.dailyfinance.com/2010/11/19/expedia-mobiata/http://www.dailyfinance.com/2010/11/19/expedia-mobiata/#commentsFiled under: ,

Until now, online travel site Expedia (EXPE) has had meager mobile offerings. But that is about to change. This week, Expedia agreed to buy Mobiata, which sells best-selling travel applications.

The price tag of the deal was not disclosed. But the transaction is likely to give Expedia a nice boost. Simply put, mobile is now becoming a key strategic business for online travel operators.

Inspiration at the Airport

A couple years ago, 20-something Ben Kazez was waiting at an airport and had to continually look at the arrival/departure screens to check on the status of his flight. It was a nuisance. Couldn't there be a better way?

Sponsored Links
Well, his frustration became the inspiration for a mobile app called FlightTrack. It turned out to be a big hit. In fact, within a year, FlightTrack generated roughly $1 million in revenues. And the growth rate was running at 100% or so.

While FlightTrack continues to be a hot seller, Mobiata has continued to innovate. The company launched TripDeck (an itinerary manager) and HotelPal (to book hotels reservations). At the same time, Mobiata has also built its apps for platforms other than Apple's (AAPL) iPhone, such as the BlackBerry (RIMM) and Google's (GOOG) Android.

True, there are several thousand travel apps on the market, but many of them are lacking in useful features. The fact remains that it is difficult to design effective interfaces. It often means focusing only on key features, as well as sending data quickly to the user.

A Smart Move When Speed Is Crucial

Currently, mobile business accounts for roughly 4% of Expedia's traffic. But of course, the growth is strong (up five times over the past year). Consider that 61% of the world's population uses a mobile device, and that base is expected to grow by about one billion near the end of 2011.

Mobile advertising is also on the verge of a breakout. Spending came to $733 million last year -- and the forecast for 2014 is $4.7 billion. It's inevitable that a sizable amount of this will go to travel apps.

No doubt, Expedia could have hired programmers to bulk up its own mobile efforts. But this would have been time-consuming. Why not lower the risk by purchasing a top player in the space?

It's definitely a smart move -- and speed is critical. After all, just look at rival Kayak, which filed to go public this week. The company's mobile app has already seen four million downloads and has been a key driver for growth.


Permalink | Email this | Comments

]]>ExpediaHotelPaliPhone appsMobile appstraveltravel sitesTripDeckTom TaulliFri, 19 Nov 2010 12:35:00 ESTKayak IPO: Another Priceline.com?http://www.dailyfinance.com/2010/11/17/kayak-ipo-another-priceline-com/http://www.dailyfinance.com/2010/11/17/kayak-ipo-another-priceline-com/http://www.dailyfinance.com/2010/11/17/kayak-ipo-another-priceline-com/#commentsOnline travel sites have provided some big wins for investors. A few months ago, the Indian travel agency MakeMyTrip (MMYT) went public at $14 and the stock is now trading at $28.28.

Priceline.com (PCLN) has been another stellar performer. So far this year, its shares have gone from $173.32 to $428.10. The market cap is now a whopping $19.5 billion.

Investors may get another chance to participate in the gains. This week, Kayak filed to go public. The pricing terms have yet to be set, but it looks like the offering should be red hot. As a sign of its investment attractiveness, Kayak has investors that include tier-one players like Sequoia Capital, Accel Partners, General Catalyst Partners and Oak Investment Partners.

Revenues on a Roll

Founded in 2004, Kayak leveraged Web 2.0 technologies to build a next-generation travel site. The co-founders actually helped to build companies like Orbitz, Expedia and Travelocity.

And they certainly leveraged their experiences effectively. During the past nine months, Kayak has posted $128 million in revenues, up 48% over the year-ago period. And revenues have been accelerating lately. There was an 80% spike in the third quarter.

Sponsored Links
Then again, Kayak is easy to use and indexes hundreds of sites for airline and hotel rates. This year, there were roughly 469 million user queries on the system. Keep in mind that about 72% of these queries came directly to the website, not from third-party sources. In other words, Kayak has substantial brand and loyalty with its users.

No doubt, the audience is highly attractive to advertisers. But to improve things even more, Kayak has invested in its technology platform to allow better targeting of its user base.

Recent Investments Require Capital

To remain competitive, Kayak realizes it needs to ramp-up spending on marketing. So the company has recently launched a television campaign. This type traditional marketing has been a big help for companies like Priceline.com.

What's more, Kayak is getting aggressive in global markets. The company already operates 14 sites outside the U.S., including Germany, the U.K. and India.

Finally, Kayak has been investing in mobile applications. Consider that there have already been four million downloads of its apps (across various mobile platforms like the iPhone).

While these investments are critical, they will also require large amounts of capital. So an IPO makes a lot of sense. However, investors will likely need to wait until early next year until this offering hits the markets.


Permalink | Email this | Comments

]]>KayakTom TaulliWed, 17 Nov 2010 12:35:00 ESTNovatel Wireless Strikes a Deal for Enforahttp://www.dailyfinance.com/2010/11/08/novatel-wireless-enfora/http://www.dailyfinance.com/2010/11/08/novatel-wireless-enfora/http://www.dailyfinance.com/2010/11/08/novatel-wireless-enfora/#commentsFiled under:

NVTL buys EnforaNovatel Wirelss (NVTL) has agreed to acquire privately held Enfora, a provider of asset management solutions, for $64.5 million in cash. The deal may result in an additional $6 million if certain milestones are achieved.

After reaching about $12 a year ago, the stock price of Novatel went into a tailspin, losing more than half its value. But over the past couple months, the company has benefited from the big tech rally, and now shares are trading at $10.19.

So can Novatel keep up the momentum? Well, the company is in a volatile business: broadband technologies for mobile devices. But as the economy improves and industry demand continues to grow, things do look promising. And this latest deal with Enfora should help.

A Leader in M2M Technology

During the 1990s, Mark Weinzerl was a vice president at INET, which helped telecom companies design and manage communications networks. He helped the company go public in May 1999 but wanted to run his own operation. So in September 1999, he purchased the wireless data assets from INET. It was a good decision since it became the basis for Enfora.

Now the company is a leader in the growing industry for machine-to-machine (M2M) technology. Essentially, this involves software and embedded systems that allow mobile devices to communicate with each other. This can be helpful with monitoring car traffic, temperatures, inventory and so on.

Since inception, Enfora has sold over seven million units of its core solution. The customers span industries like transportation, industrial automation, security, and health care.

The Benefits of a Deal

For Novatel, the deal for Enfora will certainly bolster its footprint in the mobile space. First of all, there will be the addition of a strong research & development team. Next, the customer bases have little overlap. In other words, there should be opportunity for cross-selling.

Sponsored Links
The financial profile of Enfora is attractive. Over the past year, revenues came to $61.3 million and gross margins were 36%. The transaction will be immediately accretive to Novatel's non-GAAP earnings.

More importantly, the growth for Enfora should continue. According to ABI Research, the market for M2M technology is expected to go from $286 million in 2010 to $628 million in 2014.

And with the scale of Novatel, Enfora is likely to be a major beneficiary of this market. True, in today's trading, Novatel's stock price is unchanged. But in light of the growth potential of Enfora -- and the attractive valuation of one times revenues -- the deal should help further the boost Novatel's stock price over the next year.


Permalink | Email this | Comments

]]>acquisitionsNovatelTom TaulliMon, 08 Nov 2010 12:30:00 ESTNatural Gas Firm Exco Gets $4.4 Billion Offer to Go Privatehttp://www.dailyfinance.com/2010/11/01/natural-gas-firm-exco-gets-4-4-billion-offer-to-go-private/http://www.dailyfinance.com/2010/11/01/natural-gas-firm-exco-gets-4-4-billion-offer-to-go-private/http://www.dailyfinance.com/2010/11/01/natural-gas-firm-exco-gets-4-4-billion-offer-to-go-private/#commentsFiled under: ,

Natural Gas Firm Exco Gets $4.4 Billion Offer to Go PrivateNatural gas prices have been persistently sluggish lately, but it looks like deal-making is about to rev up in the sector. A few weeks ago, the Darden family, which owns 24% of Quicksilver Resources (KWK) made an overture to take the Texas-based energy firm private at a "substantial premium to the current market price."

Now it looks like there will be another deal: The chairman and CEO of Exco Resources (EXO), Douglas Miller, has offered to buy the energy company for $20.50 per share or about $4.4 billion. To pull this off, he has obtained preliminary support from a group of major investors in the company like Oaktree Capital Management and Ares Management.

Even oil legend T. Boone Pickens is interested in the deal. Pickens, a big proponent of natural gas, has a 5% stake in Exco, and a buyout would certainly be a nice boost for his efforts.

A Look at Exco

Most of Exco's revenues derive from the production of natural gas, with its main properties in eastern Texas, northern Louisiana, Appalachia and the Permian Basin in western Texas. It also holds 50% stakes in two midstream joint ventures.

Over the past couple of years, Exco underwent a significant restructuring, selling off various divisions and changing its credit agreements. But the company's most important move was to form a broad strategic relationship with British oil and gas company BG Group to capitalize on the properties in eastern Texas, Louisiana and Appalachia. In the deal, BG Group agreed to pay up to $1.8 billion in net total proceeds, which no doubt was extremely helpful in Exco's efforts to pare down its debts.

Exco focuses on so-called shale plays. Because of the complexities of extracting fossil fuels from these sources, it's often an expensive process, so it's not uncommon for smaller firms like Exco to seek help from global energy operators like BG.

Next Steps?

After a couple years of losses, Exco has returned to profitability. In the latest quarter, net income came to $564 million, or $2.62 per diluted share. The number was inflated with divestitures and unrealized derivative gains, but it still looks like Exco has streamlined its operations.

The company has a large amount of proven gas reserves, which currently stand at 1.2 billion cubic feet. But with improved technologies and further exploration, those reserves may ultimately grow to several times that amount over the next few years.

No doubt, those numbers are attractive to long-term investors like Pickens, Oaktree and Ares -- all of whom have the wherewithal to wait until pricing gets better and yields improve. But shareholders realize this and will probably want a higher bid on a buyout deal.

Permalink | Email this | Comments

]]>acquisitionsaresAres ManagementBGbg groupEnergyenergy pricesenergy stocksExcofossil fuelsgas pricesGoing Privatemergers and acquisitionsNatural GasOakTreeOaktree CapitalOaktreeCapitalManagementoilshaleshale gast. boone pickensTom TaulliMon, 01 Nov 2010 12:55:00 ESTIs Pre-Paid Legal Ready for a Buyout?http://www.dailyfinance.com/2010/10/25/is-pre-paid-legal-ready-for-a-buyout/http://www.dailyfinance.com/2010/10/25/is-pre-paid-legal-ready-for-a-buyout/http://www.dailyfinance.com/2010/10/25/is-pre-paid-legal-ready-for-a-buyout/#commentsFiled under:

PPD earningsPre-Paid Legal Services (PPD) received the kind of letter that shareholders love, saying that a "well-known" private equity firm has made an offer to buy the company for $60 per share.

Yes, Pre-Paid Legal is in play and the company has already formed a special committee to evaluate strategic alternatives. Although, it's a good bet that the only "alternative" will be to sell the company. And Wall Street agrees. So far in today's trading, the shares of Pre-Paid Legal are up 14% to $64.24.

It Began with a Car Crash

Back in 1969, Harland Stonecipher was involved in a head-on collision. While his insurance covered the car damage and the hospital stay, the fact was that his legal fees were enormous. Unfortunately, Stonecipher had to pay for them himself.

Sponsored Links
But he wondered: Is there a business opportunity here? So Stonecipher did extensive research of European legal expense plans and believed he could setup a similar approach in the U.S.

The business took a lot of time to get traction, but Stonecipher persisted. And it's a good thing he did. Now, Pre-Paid Legal provides legal expense plans for over 1.5 million families across the U.S. and Canada.

One key to success is the company's low-cost strategy. For example, some monthly fees are as low as $26. For this, customers get access to a network of independent provider law firms.

What's more, Pre-Paid Legal leverages a network-marketing system, which can certainly spur growth.

Next Steps?

On Monday Pre-Paid Legal also announced its third-quarter earnings report. Net income spiked 46% to $15.9 million and diluted earnings per share increased 63% to $1.61. A big part of the improvement was a reduction in overall commissions.

However, Pre-Paid Legal has had its share of controversy. Ironically enough, the company has been the target of various lawsuits, such as for dubious sales and marketing practices. But this is fairly common for a network-marketing company and Pre-Paid Legal has had success fighting the claims.

At the same time, Pre-Paid Legal has had difficulties finding revenue growth. Of course, the sluggish economy has been a factor. What's more, it is getting more difficult to wring growth from the network-marketing platform.

Despite all this, the fact remains that Pre-Paid Legal generates substantial cash flows. For the first nine months of 2010, there was a 10% increase to $53.5 million. No doubt, this will make it much easier for a leveraged buyout and to find willing suitors.

Permalink | Email this | Comments

]]>acquisitionspre-paid legal services buyoutpre-paid legal services earningsprivate equityTom TaulliMon, 25 Oct 2010 13:30:00 ESTGE Strikes a Healthy Deal for Cancer Diagnostics Company Clarienthttp://www.dailyfinance.com/2010/10/22/ge-clarient-acquisition/http://www.dailyfinance.com/2010/10/22/ge-clarient-acquisition/http://www.dailyfinance.com/2010/10/22/ge-clarient-acquisition/#commentsFiled under:

General Electric (GE) Vice Chairman John Krenicki recently said the company was revving up for more acquisitions, and today it announced plans to buy Clarient (CLRT), a maker of cancer diagnostic solutions, for $587 million.

GE has structured the deal as a tender offer and has already received approval from 47% of the shareholders. In today's trading, Clarient shares are up 33% to $4.98.

This is a sign that Corporate America is going to do something with its hoard of cash. Also, acquisitions are critical for finding revenue growth -- whether in the U.S. or in emerging markets.

A Leader in Cancer Diagnostics

While Clarient got its start back in 1993, the company actually transformed itself in 2005. And it was a good move. The company realized that the completion of the genome project would be extremely valuable in creating advanced oncology testing systems. So Clarient invested money in developing a lab to pursue this opportunity. The company also made some key hires.

Sponsored Links
As a result, Clarient is now one of the leaders in the fast-growing space of molecular diagnostics. The company's tests provide granular details of patients and can provide optimal treatments. Clarient can analyze breast, prostate, lung, colon and blood-based cancers. What's more, pathologists can view the testing results from a internet portal, called PATHSITE.

And yes, Clarient has been growing at a rapid clip. In the latest quarter, revenues increased by 21% to $28.7 million. The total customer base -- of pathology and oncology practices -- is roughly 1,300. And, the retention rate is an impressive 98%.

Clarient has been making strides with its operating cash flows, which came to $2.5 million in Q2. There was improvement in collections and management of bad debts, which are often challenges in the health care sector.

A Big Deal, Even for GE

The market opportunity for Clarient is enormous. The projection is that the global demand for cancer-profiling solutions will ramp from $15 billion in 2009 to $47 billion in 2015. Of course, aging populations will mean increases in cancer daignoses and the need for better treatments. While this is a grim prospect, advances like molecular diagnostics will be vitally important to fighting cancer.

Already, GE Healthcare has a strong footprint in medical diagnostic and information systems. All in all, the business has been growing and the addition of Clarient will certainly be a boost, given its strong pipeline of new products, especially tests for breast cancers.

In fact, GE thinks it can turn the molecular diagnostic business into more than $1 billion in revenues. Even for a company of its size, this is still a big deal.

Permalink | Email this | Comments

]]>acquisitionscancer carecancer diagnosticscancer treatmentClarientGEhealth care solutionshealth care stocksTom TaulliFri, 22 Oct 2010 12:40:00 ESTIs Coal Miner Massey Buyout Bait?http://www.dailyfinance.com/2010/10/19/massey-energy-buyout/http://www.dailyfinance.com/2010/10/19/massey-energy-buyout/http://www.dailyfinance.com/2010/10/19/massey-energy-buyout/#commentsFiled under:

It's been a tough year for Massey Energy (MEE), but today the stock got a boost. The coal mining company announced it is "exploring strategic alternatives," which is finance-speak for a possible buyout.

Investors are taking the news seriously -- shares of Massey were up almost 10% at one point in today's trading, though they have since settled around 6%. While a deal is a real possibility, it will likely take a few months to put together. In the meantime, Massey's stock will probably be volatile.

Disaster at the Upper Big Branch Mine

Founded in 1920, Massey is now one of the largest coal producers in the U.S., with its main operations in Central Appalachia. Over the years, the company has been savvy with its acquisitions -- finding new low-cost sources of reserves. For example, in the latest quarter, Massey sold 9.8 million tons of coal, up from 9.4 tons in the same period a year ago.

The company focuses primarily on metallurgical coal, which is in high demand because of its use in steel -- a key import for countries like China.

Despite all this, Massey still posted a net loss of $88.7 million in the second quarter of 2010. The main reason, of course, was the estimated expenses related to the tragedy at its Upper Big Branch mine in West Virginia. In early April, a massive explosion there killed 29 miners. It was the worst U.S. mining disaster in over 40 years.

Is the Timing Right?

From time to time, Massey has been the subject of buyout rumors. But now, the timing seems right. First of all, government officials are likely to increase scrutiny of other Massey mines. Besides the explosion at the Upper Branch mine, there have been other safety violations.

Next, it looks like investors have also factored in the growth in coal prices, at least in the short run. In fact, the recent interest rate hike in China may actually moderate things.

Sponsored Links
Yet, the fact remains that Massey has substantial reserves of coal. And based on the current valuation of the company's stock, a buyer could pick up these assets for a cheap valuation. True, there will be uncertainty regarding the litigation and regulatory liabilities. But then again, a buyer can structure a transaction to fire-wall these problems.

And what about a going-private transaction? It's possible, but it will probably be difficult to pull off. Massey's debt load is large because of its aggressive acquisitions. Also, the litigation costs will eat into cash flows.

So a buyout from another coal operator appears to be the most logical alternative for Massey. And it would certainly be a good way to capitalize on the long-haul trends in industry, especially as urbanization and electrification continue to grow in emerging countries.

Permalink | Email this | Comments

]]>acquisitionsbuyoutBuyoutRumorCoal miningcoal mining stocksMassey EnergyUpper Big Branch mineTom TaulliTue, 19 Oct 2010 12:30:00 ESTIs Quicksilver Resources Gearing Up for a Buyout?http://www.dailyfinance.com/2010/10/18/is-quicksilver-resources-gearing-up-for-a-buyout/http://www.dailyfinance.com/2010/10/18/is-quicksilver-resources-gearing-up-for-a-buyout/http://www.dailyfinance.com/2010/10/18/is-quicksilver-resources-gearing-up-for-a-buyout/#commentsFiled under:

Over the years, the stock price of Quicksilver Resources (KWK) has certainly been volatile. Then again, the company's industry -- natural gas -- has also seen lots of change. No doubt, such an environment makes it difficult to take-on long-term investments.

So the Darden family, which owns roughly 24% of Quicksilver, has made an overture to take the company private. The price tag? Well, that hasn't been disclosed. Instead, the offer is likely to be at a "substantial premium to the current market price" (this is according to a letter from the Darden family).

That's nice news for shareholders. As a result, the stock price is up 16%, to $14.61.

But in light of this move, is there still more room on the upside? Actually, it looks like the answer is yes.

A Look at Quicksilver

Based in Forth Worth, Texas, Quicksilver focuses on exploration and production of natural gas and oil properties. These are mostly unconventional sources of energy like shale gas, coal bed methane and tight gas sands. Such things can be difficult and costly to extract. However, they represent a large source of energy.

In fact, Quicksilver has proved reserves of approximately 2.4 trillion cubic feet equivalents, primarily in Texas and Alberta, Canada. Although, the company has been exploring areas in places like Horn River Basin of Northeast British Columbia and the Green River Basin of Colorado.

Sponsored Links
What's more, Quicksilver has also taken equity interests in various energy operators. For example, the company hold 33% of the limited partner unit in Breitburn Energy Partners LP (BBEP), which has a market value over $1 billion.

As for its latest earnings report, Quicksilver reported net income of $86.8 million. This was up from a loss of $21.8 million in the same period a year ago.

Next Step?

During the past few years, natural gas prices have been fairly depressed. There has been a glut of supply, as well as reduced demand because of the global recession.

So why take Quicksilver private? It looks like the main attraction is the Horn River Basin property. Based on preliminary results, the reserves there may be multiples above the current forecasts.

Of course, it will take much time to realize that potential and capture a nice return. But as a private company, it will be easier to do this without the need to cater to the quarter-by-quarter demainds of investors. Besides, credit markets are improving and Quicksilver should be able to get debt financing for a buyout.

But in light of this potential, the company will probably need to pay a higher price to get a deal done. After all, the current stock price is still at a discount to its 52-week high.

Permalink | Email this | Comments

]]>acquisitionsbuyoutNatural GasquicksilverTom TaulliMon, 18 Oct 2010 15:01:00 ESTH&R Block Gets Serious About Digital with Purchase of TaxACThttp://www.dailyfinance.com/2010/10/14/handr-block-gets-serious-about-digital-with-purchase-of-taxact/http://www.dailyfinance.com/2010/10/14/handr-block-gets-serious-about-digital-with-purchase-of-taxact/http://www.dailyfinance.com/2010/10/14/handr-block-gets-serious-about-digital-with-purchase-of-taxact/#commentsFiled under: , ,

The past few years have seen the downfall of some once-dominant bricks-and-mortar retailers, in part due to less conventional and Internet-based competition. A prime example is Blockbuster Video, which recently filed for bankruptcy, finally succumbing to the onslaught of operators like Netflix (NFLX) and Coinstar's (CSTR) Redbox.

No doubt, investors are concerned about potential disruptions in other related businesses -- and they should be. Just look at H&R Block (HRB). The company has been a laggard in its online efforts while Intuit's (INTU) TurboTax continues to gain market share. So far this year, H&R Block's stock is down 44% and Intuit's shares are up 53%.

To start remedying the situation, H&R Block is making some bold moves. This week, the company agreed to pay $287.5 million for 2SS Holdings, which develops the desktop and online tax-prep software TaxACT.

A Look at TaxACT

Turns out, H&R Block's opportunity to make a move against Intuit can be traced back to moves made by Intuit earlier in its rise.

Sponsored Links
One of the most important deals in Intuit's corporate history was its $225 million purchase of ChipSoft in 1993. At the time, ChipSoft's TurboTax had about 60% of the tax software market. A year later, Intuit bought Parsons Technology, which was the developer of the competing Personal Tax Edge product. But Intuit wanted the user base, not the software, so it put an end to Personal Tax Edge.

At that point, some of the developers of that software saw an opportunity to provide a new, low-cost tax prep program. The result was the creation of TaxAct in 1998.

It wasn't easy, their efforts took time to get traction, but that only spurred them to innovation. For example, TaxAct was the first to give away its federal tax program, which boosted their sales of add-on purchases such as state modules and premium packages.

TaxAct also developed an efficient online marketing platform. Then again, because of the low price points of its products, it had no choice. TaxAct only has 70 employees, yet it was able to generate $70 million in revenues in the past year.

The Impact

H&R Block can certainly benefit from the acquisition of a dynamic company like TaxAct to help it with online marketing and low-cost strategies. For example, TaxAct's EBITDA margin is a whopping 50%.

Even though the price tag for the purchase is far from cheap, the transaction is still expected to add $0.05 per share in earnings for fiscal year 2011. What's more, the deal will double the number of H&R Block's digital returns. Last season, about five million tax filers used TaxAct software.

Despite all this, the fact remains that H&R Block remains a predominantly a retail, bricks-and-mortar company. And unfortunately, the market is likely to remain stagnant. So while H&R Block is making the necessary moves to transition its business, its future is still uncertain. After all, even Blockbuster Video made several attempts to change its business model, and the outcome was still Chapter 11.

Permalink | Email this | Comments

]]>2ssacquisitionsH&R BlockHR BlockHR Block Buys 2SSHR Block Buys TaxActIntuitmergers and acquisitionstax preptax preparationtax preparation softwareTaxActTurboTaxTom TaulliThu, 14 Oct 2010 13:43:00 ESTChina's Harbin Electric Sparks a Buyout Bid From Its CEOhttp://www.dailyfinance.com/2010/10/11/harbin-electric-buyout/http://www.dailyfinance.com/2010/10/11/harbin-electric-buyout/http://www.dailyfinance.com/2010/10/11/harbin-electric-buyout/#commentsFiled under: ,

Tianfu Yang, chairman and chief executive officer of China's Harbin Electric (HRBN), is proposing to take the company private. Yang currently owns roughly 31% of the outstanding shares. The bid comes to $24 per share, or a total value of $752.2 million. The private equity sponsor is Baring Private Equity Asia, and the financial adviser is Goldman Sachs (GS).

Since becoming a public company in early 2005, Harbin Electric, which manufactures electric motors in China, has certainly had a volatile stock. While the company has a massive market opportunity, the industry is competitive, and it can take time to gain traction. In light of Monday's buyout offer, however, Harbin's management continues to be upbeat.

Sophisticated Micro-Motors

Founded in the late 1990s in Harbin, China, Harbin Electric now has an extensive line of motors, including linear, micro and rotary motors. While linear motors are similar to traditional ones, there is a difference in the rotational force. Generally, this allows for better designs, efficiency and precision of movement. Harbin sells linear motors to a large number of customers in both China and the U.S.

Sponsored Links
The company's micro-motors are highly sophisticated systems that help with things like automating seat folding, electric power steering and trunk openings. Harbin's industrial rotary motors are focused on trains, power plants and the construction industry.

Harbin is seeing a nice payoff from its offerings, according to its quarterly report. Total revenues spiked 175% to $105.44 million, and adjusted net income increased 224% to $24.02 million. A key part of the company's success has been a restructuring, which has led to better operating efficiencies, including the disposals of non-core assets, as well as the purchase of Xi'an Tech Full Simo Motor.

During the recent recession, Harbin saw a material drop in its business. That's natural because the company's business is highly cyclical. And there are still concerns that the business will slow down if China's economy weakens. But for the long haul, Harbin's prospects look promising. The company has next-generation motors that will be essential for China's growing economy and should maintain premium margins. So, it should be no surprise that Harbin's management wants to own the company.

Interestingly enough, this deal could also be the start of another important development in China. The country has so far seen few private equity transactions. But as its financial system gets more sophisticated and the industrial base continues to expand, it seems inevitable that China will see more and more buyout deals.

Permalink | Email this | Comments

]]>Baring Private Equity GroupGoing PrivateHarbin Electricleveraged buyoutsPrivate equityTom TaulliMon, 11 Oct 2010 12:30:00 ESTPretzel Logic: Will Focus Brands' Deal for Auntie Anne's Lead Focus to an IPO?http://www.dailyfinance.com/2010/10/08/auntie-annes-gets-new-owner-deal-could-lead-to-ipo/http://www.dailyfinance.com/2010/10/08/auntie-annes-gets-new-owner-deal-could-lead-to-ipo/http://www.dailyfinance.com/2010/10/08/auntie-annes-gets-new-owner-deal-could-lead-to-ipo/#commentsFiled under: , , ,

Anne Beiler, founder of Auntie Anne's PretzelsIt's a good bet you've never heard of Focus Brands. But you definitely know the company's holdings. They include restaurant and snack chains like Carvel Ice Cream, Cinnabon, Schlotzsky's and Moe's Southwest Grill.

Well, this week Focus has picked up another marquee name: Auntie Anne's. It is the world's largest hand-rolled soft pretzel chain.

While the price tag on the deal was not disclosed, it was likely several hundred million dollars. Auntie Anne's has 1,100 stores in 44 states and is in 21 countries. As of last year, the company posted record sales of $353 million and rolled more than 500,000 pretzels every two days.

A Mistake Was Anne's Big Break

Yes, there is a real Auntie Anne. But her full name is Anne Beiler (pictured). Back in 1987, she made some extra money at the farmer's market by twisting pretzels. But she quickly realized there was a big business opportunity. So Beiler set up a retail location in Downingtown, Pa.

Interestingly enough, like all great businesses, Auntie Anne's benefited from a foul-up. That is, Beiler ordered the wrong ingredients. So she improvised and actually came up with a very tasty pretzel.

With a minimal marketing budget, she had to rely on word of mouth to get foot traffic. No doubt, the unique pretzels were enough to make this happen. Another differentiator was a social mission. Over the years, Auntie Anne's has been a generous benefactor of a variety of causes, such as the Children's Miracle Network and First Book.

Another key to the growth of Auntie Anne's was the franchise model. That brought about a boost in locations as well as recurring revenues.

A Powerful Business Model

The private equity backer of Focus Brands is Roark Capital. The firm has built a powerhouse in the franchise industry, with 19 acquisitions. In all, there are 2,200 locations in its system and revenues are over $1.4 billion.

As seen with companies like Yum! Brands (YUM), which owns KFC, Pizza Hut and Taco Bell, the franchise model can be powerful and allow for steady growth. It's the kind of operation that often gets traction on Wall Street.

It seems inevitable that Focus Brands will eventually gear up for a public offering. And in light of the strong portfolio and its scale, the company has the right ingredients to get investors interested.

Permalink | Email this | Comments

]]>anne beilerAuntie Annesfast food chainsFOCUS BrandsIPOsRoark CapitalTom TaulliFri, 08 Oct 2010 12:50:00 ESTSome Sunlight for Cloud Computing Stockshttp://www.dailyfinance.com/2010/10/07/cloud-computing-stocks/http://www.dailyfinance.com/2010/10/07/cloud-computing-stocks/http://www.dailyfinance.com/2010/10/07/cloud-computing-stocks/#commentsFiled under: , , ,

While it's been tough for momentum investors to find opportunities, there have been some bright spots -- like Chinese IPOs and cloud-computing companies. Many of these stocks have soared this year, and the rally has been broad.

The problem? The hot money can suddenly go cold -- as happened Wednesday with cloud-computing stocks. Equinix (EQIX), which provides hosting services, gave slightly weaker guidance. The company's revenue outlook for Q3 dropped from $335 to $338 million to $328 to $330 million, with the annual forecast falling to $1.22 billion from $1.23 to $1.24.

On its face, these seem like inconsequential changes. But not for investors. Shares of Equinix plunged 33%. More importantly, many other stocks in the sector also sold off. Citrix Systems (CTXS) was off by 14%, VMware (VMW) lost 9% and Salesforce.com (CRM) fell by 11%.

No doubt, cloud-computing stocks needed a correction and investors had a catalyst with the weakness from Equinix. But is the reaction something more? Is the cloud-computing space maturing and seeing more competition?

The Cloud-Computing Pioneers

The origins of cloud computing go back to the late 1990s, with the efforts of pioneering companies like Salesforce.com and NetSuite (N). Up until this time, the enterprise software market was vulnerable to disruptions. The industry's business model was to develop complex software and sell it for high upfront prices to customers. Ironically, this was often the cheapest part of the transaction since there was usually a need for high-priced consultants to install and maintain the software.

But with cloud computing, the approach was different. Customers could access the software via the Internet, which made it easier to update. There was also lower investment requirements for servers and other infrastructure. In fact, the technology was easier to use. After all, the interface looked like Amazon.com or eBay. Finally, the business model involved a much more affordable subscription fee (usually based on the number of users).

Sponsored Links
The adoption took time, as with any new technology. But the leader in the space, Salesforce.com, continued to rack up growth, even during the recent brutal recession. In other words, investors eventually realized that cloud computing was not a fad.

Another key development was that major companies like IBM (IBM), Hewlett-Packard (HPQ) and CA (CA) started to acquire cloud-computing companies. The opportunity was too big to ignore.

Look at the Dips as Opportunities

All major technology trends are dynamic. The competition intensifies and there will certainly be many losers. This happened with PCs, minicomputers, the Internet and mobile phones. The same will apply to cloud computing.

So going forward, investors need to do much more analysis when making their choices. This means finding companies with strong barriers to entry, big markets and top-notch teams. For example, NetSuite (N) looks like a good fit. The company develops software for enterprise resource planning (ERP), which helps companies manage their internal operations like inventory, payroll and HR. This kind of software is complicated and takes time to get customers. But NetSuite has been growing its business at a nice rate and it looks like things are starting to accelerate.

However, even when focusing on good companies, there will still be volatility in the stock prices. And while this may be stomach churning, the dips can provide opportunities to invest in companies likely to grow for the long haul.

Permalink | Email this | Comments

]]>cloud computingequinixMomentum InvestingMomentumStocksalesforce.comTom TaulliThu, 07 Oct 2010 12:10:00 ESTChipmaker Microsemi Juices Its Lineup With a $430 Million Deal for Actelhttp://www.dailyfinance.com/2010/10/04/chipmaker-microsemi-juices-its-lineup-with-a-430-million-deal-f/http://www.dailyfinance.com/2010/10/04/chipmaker-microsemi-juices-its-lineup-with-a-430-million-deal-f/http://www.dailyfinance.com/2010/10/04/chipmaker-microsemi-juices-its-lineup-with-a-430-million-deal-f/#commentsFiled under: , , ,

With bulging cash positions, large semiconductor companies are getting aggressive with acquisitions. Even Oracle's (ORCL) Larry Ellison has said he wants get into the action.

The latest big deal came today: Microsemi (MSCC), which develops analog mixed-signal semiconductors, has agreed to pay $430 million for Actel (ACTL). The transaction comes to $20.88 per share and is all-cash.

Actually, Microsemi has been busy on the M&A front. Back in late March, the company shelled out $100 million for White Electronic Designs in another all-cash deal.

Suited to the Final Frontier

Founded in the mid-1980s, Actel has built a solid business in a technology called field programmable gate arrays (FPGAs). These are integrated circuits that are modified for specific uses by the customer after they're manufactured.

While FPGAs have been around for a while, Actel has some unique abilities. For example, its chips require low power and can withstand extreme environments, such as radiation. As a result, Actel has been able to make inroads with satellite and space applications.

The upshot is that Actel has posted consistent financial results, with 81 consecutive quarters of positive pro forma net income. Also, it has roughly 3,500 customers.

"Perfect" Deal?

The strength should continue. The FPGA market is forecasted to grow 12.6% annually from 2009 to 2014. This compares to a growth rate of 7% for the overall semiconductor market.

On the conference call, Microsemi referred to its Actel deal as "perfect." True, executives like to pump things up, but there's reason for optimism.

Sponsored Links
Actel broadens Microsemi's product line and moves it up the value chain, which means higher margins. Besides, Microsemi has a nice opportunity to leverage its distribution footprint. For example, the deal is expected to be accretive to earnings by 22 cents to 28 cents per share in the first full calendar year ending December 2011. That's certainly a big deal. And with the upturn in the semiconductor market, the results may be even better.

So it should be no surprise that Microsemi's shares are up around 6% in today's trading. In fact, the company was able to snag a $375 million seven-year term loan and a $50 million credit facility to finance the deal. In light of the extremely low interest rates these days, the deal's costs are likely be extremely low.

Permalink | Email this | Comments

]]>actelchipmakerchipmakingmicrosemiMicrosemi buys Actelsemiconductor industrysemiconductor stockssemiconductorstech acquisitionsTom TaulliMon, 04 Oct 2010 15:30:00 ESTIs Oracle the Leader in Cloud Computing?http://www.dailyfinance.com/2010/09/22/oracle-cloud-computing/http://www.dailyfinance.com/2010/09/22/oracle-cloud-computing/http://www.dailyfinance.com/2010/09/22/oracle-cloud-computing/#commentsFiled under: , , ,

OracleDuring the dot-com boom in the 1990s, thousands of companies competed to become category leaders. Only a few were successful. Throughout all the jostling, however, the infrastructure providers -- such as Cisco (CSCO) and Oracle (ORCL) -- always came out ahead, regardless of how the markets changed. Simply put, the dot-coms needed routers and databases.

It looks like the same scenario is playing out again, this time in the cloud. In cloud computing, companies share Internet technologies to manage accounting, sales leads, inventory, costs and so on. It is often cheaper since a company does not have to buy servers or hire expensive consultants. Besides, companies only pay a subscription for the cloud services, which makes things even more affordable.

Already, there are clear leaders in cloud computing, like Salesforce.com (CRM) and NetSuite (N). But at the same time, the infrastructure players are also getting a nice boost -- and this, of course, includes Oracle.

Oracle Moves Into the Cloud

Over the years, Oracle has transformed its business through acquisitions. As part of this strategy, it has become a dominant player in enterprise resource planning (ERP) software, which manages the core accounting and financials of a company.

ERP is not necessarily a growth business -- at least for the large market segment -- but it generates steady cash flows. After all, what company wants to uproot its system? It's usually a very bad idea -- and costly.

Sponsored Links
But in the meantime, Oracle has spent billions on improving its infrastructure products. Deals for companies like Sun and BEA have provided the company with solutions for middleware, security and servers. These are critical elements for data centers, which are at the center of cloud computing. After all, this is where the processing occurs.

So it should be no surprise that at this week's Oracle conference, CEO Larry Ellison has been pumping up the cloud. And he is clear that his company will be the leader.

In fact, Oracle announced the introduction of Exalogic, a high-end machine that has all the necessary requirements for setting up a cloud platform. Since everything is integrated, the maintenance and costs should be competitive. What's more, Oracle's aggressive sales team will certainly find ways to get its huge installed base to buy-up the Exalogic solution.

Of course, other major infrastructure players -- like Hewlett-Packard (HPQ), CA Technologies (CA) and IBM (IBM) -- are also spending big bucks on acquisitions to benefit from the cloud. So far, the targets have been in storage and data warehousing, like 3Par and Netezza. No doubt, there will be more deals and the valuations will remain frothy.

But Oracle still has a unique advantage: its database business. It is a huge cash generator and provides the company with a solid foothold in many companies. This leverage will make it much easier for Oracle's cloud ambitions and provide it with a long-term growth ramp.

No wonder Mark Hurd went to Oracle after departing HP.

Permalink | Email this | Comments

]]>cloudCloud Computingmark hurdoracleTom TaulliWed, 22 Sep 2010 12:55:00 EST