Showing posts with label Mergers and Acquisitions. Show all posts
Showing posts with label Mergers and Acquisitions. Show all posts

June 14, 2016

The Continued Softening Of Microsoft

Microsoft should not be acting old and grey.

Yet they are throwing away another $26.2 billion dollars in purchasing the relative revenue and profit weakling, LinkedIn, the professional networking social media site (where odds are you have your high-level resume-type information). 

Have you ever paid a dime to LinkedIn or have you ever paid attention to  single advertisement on LinkedIn (I can’t even remember if there is advertising on there—see I pay it zero attention!)?

Unfortunately Microsoft is following suite with it’s worthless purchase of Nokia in September 2013 for $9.4 billion that was all written off and then some with yet another ridiculous, desperate move.

Microsoft has been living off their legacy product suites of Windows, Office, Outlook, and SharePoint for years…and apparently, aside from the regular forced upgrades, they seem to have virtually nothing in the innovation hopper. 

Hence, loser acquisitions of things like Yammer in 2012 for $1.2 billion (anyone use that BS Facebook-like service for inside their organization—work is not social playtime folks!).

Anyway, I like Microsoft products--they are functional, which is what I want from email, creating and editing documents, spreadsheets and slides, as well as sharing files--it's great for bread and butter tasks--nothing sexy.

But every attempt that Microsoft makes in desperation to expand beyond their core competencies comes up soft and a big money loser. 

Innovation and success is not bred by acquiring virtually worthless properties in terms of high-technology with no synergy to who they fundamentally are.  

It is almost heartbreaking to see a once great company like Microsoft continue to drown in its own excess cash and strategically hollow ideas.

Microsoft will only be successful by thinking beyond the boxed in windowed organization that they have imprisoned themselves in. 

I hope they can break a few windows and escape to some new technological thinking again soon--but the big question is whether they currently have the talent to make it so. ;-)

(Source Photo: Andy Blumenthal)


November 2, 2015

A Feel Good But Deeply Ailing U.S. Economy

Get comfortable with your salary, because it isn't going anywhere positive--payrolls are stagnant!

The Wall Street Journal reports that wages since the recession "have grown slowly, advancing at a pace of about 2% annually" for a total of 12% since 2009.

In contrast, in the 20 years prior to the recession, wages "grew on average better than 3% annually"--that's 50% more increase per year!

Sure some of the increase is now coming in the form of benefits growth, such as time off, subsidized commuting costs, and health insurance premiums, but workers still need to be able to pay their bills. 

For the federal workforce, things have even been worse with pay raises of "just 2% [total] over the last five years" and a proposed 1.3% (with locality pay) for 2016.

Is it surprising then the innovation--one of our greatest strengths--is also drastically slowing in the United States. We are not rewarding risk with reward like we used to--and that changes the whole innovation equation!

Also no surprise then that mergers and acquisition are booming as the key to corporate growth as well as cost-savings through economies of scale are seen as one of the only ways to wring out profit growth in companies bottom lines.

All in all:

While inflation is up an average of 2.13 over the same 10-year period.

- This leaves the average household more than 6% worse off then they were a decade ago...that's a lot of time to be working and getting negative returns on your investment of time and effort.

Combine this with:

Manufacturing down to only 9% of jobs in the U.S. economy

- The country's ongoing spending binge--a national debt that has doubled over 8 years from around $10 trillion to almost $20 trillion by 2017 and interest payments about to take off with rising interest rates.

- Throw in a arms-race with China and Russia and the aging Baby Boomers setting up the economy for dramatic increases in Social Security and Medicare

And the "fun" NOT is only just beginning. ;-)


October 7, 2014

The Games Organizations Play

So HP, under Meg Whitman, is breaking up into a PC/printing company and an enterprise products and services firm.

Um...well of course it’s the right thing to do to focus each and release the great value of these two companies.

Only, just a few years ago, under Carly Fiorina, HP a printer and enterprise products company combined with Compaq, a PC company, in order to gain the size and clout to succeed in the ever-competitive technology marketplace.

The B.S. of corporate America—everything and the opposite--to try and do something, almost anything, to try and raise the share prices of those strategically stalled companies.

From Meg Whitman, CEO of HP:

- October 2011--“Together we are stronger!”

- Then today, 3 years later--“Being nimble is the only path to winning.”

Yeah, whatever.

Merge, split—wash, rinse, repeat…fool the fools.

HP is still HP—especially compared to Apple, Amazon, Google, and even now Lenovo. ;-)

(Source Photo: here with attribution to Angie Harms)


September 5, 2013

Microsoft + Nokia = HP + Palm

Microsoft buying Nokia is a desperate play at mobile computing.

Unfortunately, the purchase doesn't add up  in terms of common business sense. 

Remember, in 2010, when HP bought Palm for $1.2B?

Palm once held 70% of the smartphone market to fall to only 4.9% share at the time that HP bought it and committed to "double down on WebOS."

Now, fast forward to 2013 and Microsoft is buying Nokia for $7.2B, with a mobile software market share of about 4% combined (compared to their prior Windows desktop operating system market share of over 90%) and ZDNet reporting that it was "double down or quit."

When HP bought Palm, it was a hardware maker buying software; now with Microsoft buying Nokia, it is the software maker buying the hardware vendor.

But in both cases, it's the same losing proposition. 

In 2010, at the time that HP bought Palm, Stephen Elop was leaving Microsoft to become CEO of Nokia (and in 2011 Nokia made the deal for a "strategic partnership" with Microsoft).

Now in 2013, when Microsoft is buying Nokia, HP has thrown in the towel and just sold off the remnants of Palm O/S to LG Electronics.

Ballmer is right that Apple and Google do not have a permanent monopoly on mobile computing, but purchasing Nokia is not the answer. 

Microsoft's stock is down more than 5% on the day of the merger announcement...and there is more pain to come from this acquisition and Microsoft's hubris. 

Buy more outdated technology, and you've bought nothing, but change the culture to innovate, design, and integrate, and you've changed your organization's fortunes. ;-)

(Source Photo: Andy Blumenthal)


June 15, 2012

Nokia and Microsoft, Desperate Bedfellows

A couple of hours ago, Nokia's debt was downgraded by Moody's to Junk!

Nokia was once the world largest vendor for mobile phones with almost 130,000 employees, but since the iPhone and Android, they have since fallen on hard times--who would've thought?

Just 16 months ago, in February 2011, Nokia announced a strategic partnership with Microsoft to try and stem their losses by adopting Windows Mobile, but this was like a drowning victim grabbing on to whoever is nearby to try and save themselves but only ends up in a double drowning.

No, Microsoft is not drowning exactly, but their stock has been more or less flat from a decade ago and one of the worst large-tech stock performers for the last ten years!

Will the acquisition of Yammer for $1.2 billion this week change this trend--I doubt it. 

Between Yammer for social networking and the acquisition of Skype for video-calling last year (May 2011) for yet another $8.5 billion, Microsoft is trying to fill some of it's big holes in its technology portfolio, just like Nokia was trying to fill it's gaping hole in mobile operating systems by partnering with Microsoft.

Unfortunately both Microsoft and Nokia have essentially missed the boat on the mobile revolution and the sentiment is flat to negative on their long-term prospects.

So the shidduch (match) of Nokia and Microsoft seems like just another case of misery loves company.

Desperation makes for lonely bedfellows, and thus the announcement this week by Nokia that they are going to layoff 10,000 and close 3 plants by end of 2013 was really no surprise. 

Aside from the short-term stock pop from the news of the acquisition, what do you think is going to be in the cards for Microsoft if they don't get their own innovative juices back in flow? 

Can you just acquire innovation or at some point do you need to be that innovative company yourself once again?

Rhetorical question. 

Hopefully for Microsoft they can get their mojo back on--meaning rediscover their own innovative talents from within and not just try to acquire from without.

(Source Photo: here with attribution to Kidmissile)


March 27, 2011


With all due respect to the greatness that AOL once was, enough is enough with their fledgling attempts to reinvent themselves.

OMG, the time has come, do not resuscitate (DNR) as AOL anymore.

Bloomberg Businessweek (March 28-April 3, 2011) reports "AOL Tries for Something New: Silicon Valley Cred...a new Palo Alto workspace."

Aside from the new digs, AOL has put a long-whiteboard along the hallway with the phase "AOL is cool."

But as the article says "Nothing is less cool than professing one's coolness, of course, especially if you're an Internet dinosaur evoking a bygone era of dial-up modems."

AOL was one of the hottest tech stocks in the 1990s, only to go down in one of the worst mergers in history to Time Warner.
AOL's market capitalization peaked in December 1999 at $222 billion and now is at $2 billion.

In 2002, AOL Time Warner was forced to write-off goodwill of $99 billion--at the time, the largest loss ever reported by a company.

Let's face it, AOL is not the same company it once was--it has become a shadow of its former self.

And it is flailing, trying desperately to reinvent itself, most recently with its purchase of The Huffington Post.

In my mind, one of the big problems is that rather than recognize that AOL is over, dead, kaput, and that it taints whatever it touches, it just keeps reaching out to more and more victims.

AOL needs to shut down as its former self and restart under a new name with a new identity for the new technology world it is entering a decade later!

If it really wants to "expunge the ghosts and start fresh" then it needs to relinquish the past including the AOL moniker and become a new company for a new age.

Dial up modems are long gone and not missed, thank you.

(Source Graphic: Wikipedia)


May 2, 2009

Oracle - An Architecture Treasure-trove

Anyone following the strategic acquisitions by Oracle the last few years can see a very clear trend: Oracle is amassing a treasure-trove of business applications that are powerful, interoperable, and valuable to mission delivery.
Most recently, Oracle snapped up Sun for $7.38 billion, right from under the clutches of IBM!
Oracle with $22.4 billion in revenue in 2008 and 55% of license revenue generated overseas “is the world’s largest business software company, with more than 320,000 customers—including 100 of the Fortune 100—representing a variety of sizes and industries in more than 145 countries around the globe.”(
Oracle’s roots are as a premiere database company. However, since 2004, they made more than 50 acquisitions in calculated business areas.
The Wall Street Journal, 21 April 2009, identifies some of these notable buys:
2004—PeopleSoft for human resources and financial management.
2005—Siebel for customer relationship management.
2007—Hyperion Solutions for business intelligence.
2008—BEA Systems for infrastructure management.
2009—Sun Microsystems for software, servers, and storage devices.
Oracle has been able to acquire companies with operating-profit margins of 10% and within six months expand those margins to 40%.”
With the recent purchase of Sun, Oracle is gaining control of critical open-source software such as Java programming technology, Solaris operating system, and MySQL database.
According to Forrester Research, “Forty-six percent of businesses plan to deploy open-source software in 2009.” Oracle can now provide an important service in product support and updates for this. (Wall Street Journal, 22 April 2009)
In addition, Oracle also provides various middleware to integrate business applications and automate processes.
From databases to end-user applications, from service-oriented architecture to infrastructure management, from content management to business intelligence, Oracle has put together a broad impressive lineup. Of course, this is NOT an endorsement for Oracle (as other companies may have as good or even better solutions), but rather an acknowledgement of Mr. Ellison’s keen architecture strategy that is building his company competitively and his product offering compellingly. Ellison is transforming the company from a successful single brand that was at risk of becoming commoditized to a multi-faceted brand with synergies among its various lines of business and products.
Some lessons for enterprise architects and CIOs: Build your product lineup, create synergies, uniformly brand it, and be number one or number two in every product category that you’re in (as Jack Welch famously advised) and grow, grow, grow!


February 10, 2008

Microsoft, Yahoo, and Enterprise Architecture

Microsoft offers to buy Yahoo for $44 billion—brilliant play or stupid move?
Some say it’s a brilliant move:
According to, a combined Microsoft/Yahoo would be a technology behemoth and have $65 billion in revenue, $17.6 billion in profit, 90,000 employees, and 32.7% of the U.S. search market share.
Yahoo owns semi-valuable assets like Flickr, a photo sharing site and, a social bookmark site.
Others say it’s a stupid move:
  1. Microsoft/Yahoo would still seriously trail Google’s U.S. search market share of 58.4%!
  2. Other corporate acquirers, like Oracle, generally profess acquisitions only if it enables a clear #1 market position like it is with data warehouse management, business analytics, human capital management, customer relationship management, and contract lifecycle management.
  3. Fortune Magazine, 18 February, 2008, says “Microsoft is paying too dearly for Yahoo.” Fortune asks “What exactly is Microsoft buying here? Technology? Yahoo has been managing a declining asset since Google invented a better way to do search…Technologists? Talent has been fleeing Yahoo Central since Terry Semel got there…a let’s not even talk about the clash of cultures that such a merger will create.”
  4. Yahoo has made serious management missteps, such as backing out of a deal to buy Facebook in 2006 at a $1 billion bargain (Facebook was recently valued at $15 billion) and botching the acquisition of YouTube and losing out to Google.
Fortune concludes:
  1. “Microsoft is buying an empty bag.”
  2. Yahoo will be Microsoft’s AOL” (comparing a Microsoft/Yahoo acquisition to the failed AOL/Time Warner one).
  3. Microsoft should abandon the acquisition, unbundle itself from search, Xbox, and Zune, and instead focus on improving its core competency, the operating system.
From a User-centric Enterprise Architecture perspective, it’s an interesting dilemma: should companies (like Microsoft) diversify their products and services, similar to the way an individual is supposed to responsibly manage their financial investments through broad diversification in order to manage risk and earn a better overall long-run return. Or should companies do what they do best and focus on improving their core offering and be #1 in that field.
Historically, I understand that most mergers and acquisitions fail miserably (like AOL/Time Warner) and only a few really succeed (like HP/Compaq). Yet, companies must diversify in order to mitigate risk and to seek new avenues to grow. As the old saying goes, “don’t put all your eggs in one basket.” The key to successfully diversify is to architect a #1 market share strategy, like Oracle, acquire truly strategic assets like Compaq, and not overpay like with Yahoo and AOL.


January 4, 2008

Creating Competitive Advantage and Enterprise Architecture

Planning endeavors, such as enterprise architecture, typically help drive competitive advantage for the organization.

In the book, Making Change Happen, by Matejka and Murphy, the authors summarize Porter’s model for competitive advantage, developed at Harvard University.

To achieve competitive advantage, an organization typically follows one of five strategies based on differentiation or scale:
  1. Differentiate based on superior customer service—“provide such excellent customer service that it results in strong customer loyalty. These satisfied customers not only provide repeat business, but also enthusiastically refer your business to others.” The overall strategy is encapsulated by the slogan, “the customer is always right.” User-centric EA is an excellent enabler for customer service orientation, since the architecture captures lots of information on internal and external factors, analyzes, catalogues, and serves up this information to end-users to enhance decision-making and thereby provide superior customer service. For example, the EA can identify performance metrics such as customer satisfaction, quality, timeliness, and so on and apply business, information, and technology resources to achieve superior customer service.
  2. Differentiation based on superior products—“build a better mousetrap…make products and services that are clearly better than your competitors from a feature and function perspective.” The goal is to command a price premium through innovation, superior product and service design. EA supports the development of superior products through the use of emerging or specialized technologies that can give the enterprise’s products an edge in their design and development. The EA identifies that baseline and target architectures and transition plan, and can use these to direct innovation and superior product development.
  3. Differentiation based on niche market space—“identify and focus on smaller market segments and produce products and services that appeal to those unique markets…the goal to provide a more informed, personal touch that make customers feel special, because they identify with the image associated with the product or service.” The customers in essence feel special and become members of an affinity group. User-centric EA provides for strong requirements management capability, whereby the requirements of niche customers can be identified and business and technical solutions can be deployed to satisfy their unique needs.
  4. Scale based on cost orientation—“become the low cost producer!” Common strategies to achieve low cost include: “achieving economies of scale (volume production); installing efficient (and volume discounted) supply chain management; continually improving production processes (including lean production techniques that eliminate waste); and outsourcing non-core competencies.” Here, the strategy is to “pursue continuous improvement and new technology.” EA can facilitate the investment in new technologies or more efficient technologies that reduce cost or make possible mass production and the attainment of economies of scale.
  5. Scale based on market dominance—“be the 800-pound gorilla.” Strategies here include: “acquisitions, joint ventures, exclusive supplier relationships, new product development, new market entries, warranties or guarantees, integrated sales and IT structures.” The strategy here is to “keep growing market share.” EA is vital in identifying gaps that can be filled through strategic M&A, and in integrating disparate enterprises, consolidating redundant IT systems, developing interoperability between merging or partner organizations, and providing standards and governance for these large scale enterprises.
User-centric enterprise architecture is critical to achieving Porter’s vision of competitive advantage, driving organizational change, and achieving a winning business strategy.

September 16, 2007

Stretching Leadership to the Limits and Enterprise Architecture

The Wall Street Journal, 13 September 2007 reports as follows: “This has been a tough year for Carlos Ghosn, chief executive of Renault SA and Nissan Motor Co. Accustomed to accolades for his bold approach to corporate turnarounds, Mr. Ghosn of late has endured criticism for slumping profits at both companies, sliding U.S. sales at Nissan, and persistent doubts that even a man of his prodigious energy can run two sprawling auto companies.”
From a User-centric EA approach, we are always looking for opportunities to fill gaps, reduce redundancies, improve processes, and fulfill user requirements. Often mergers and acquisitions (M&A) are viewed by the financial markets as an excellent way to accomplish one or more of these—as we often see the stocks of companies rise after an M&A announcement. Why does this happen? Because the two companies together form a kind of new target architecture that creates synergy as follows:
  • Filling in each other’s gaps (they complement each other)
  • Allowing them to consolidate operations and reduce overhead (where they overlap)
  • Using the best engineering prowess from each to improve processes
  • Better meeting customer requirements with a broader product set and greater customer reach.
Does a leader that spans across two companies, like Carlos Ghosn produce similar results like in M&A or are we simply stretching the ability of a leader beyond human means?
The answer is yes and yes. While the two companies have seen benefits from having the same leader for example, “Noting recent moves by Nissan and Renault to jointly develop engines and to expand car production in merging markets, Mr. Ghosn added, ‘all these synergies are facilitated by having a common CEO.’” On the other hand, “some industry analysts have questioned his decision to try and lead two car companies simultaneously.”
Like a rubber band holding these two car companies together, the question is will the rubber band hold and see the companies through to achieve the benefits of some degree of M&A or will the rubber band break because of the strains of leadership going too far.