NQ Logic

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Top 10 Days in 2011 for Technology

The year-end holiday season always seems like an appropriate time to reflect on what happened during the past year. While the Middle Easterners are taking their political future into their own hands, Europeans seems to have given up their economic future. The US is gearing up for its election year and the rest of the world continues to fight what the economic analysts have named the stagnation years.

In the technology world, 2011 was an unusual year with surprising consolidations, unexpected cross-market acquisitions and new multi-dollar IPOs. Here are the top 10 game-changing days for 2011 in the technology world, in order of their appearances.

February 11, 2011: Nokia partnered with Microsoft
Following Nokia CEO Stephen Elop’s "Burning Platform" memo, Nokia and Microsoft announced a new global strategic partnership. Under the proposed deal, Nokia will adopt the Windows Mobile as its principle smartphone OS, phase out its own Symbian and abandon MeeGo even before its launch. Rightly or wrongly in this reversal of strategy, Nokia’s attempt to become the third ecosystem behind Apple and Android, is now hitched to Microsoft's less-than-stellar efforts in mobile. Let' see how Nokia's first Lumia phones with Windows Mobile will do at their year-end launch in India, whether they will reverse the sharp decline in Nokia's smartphone business (-38% units shipped in Q3).

March 20, 2011: AT&T (tries to) acquire T-Mobile USA
With T-Mobile, AT&T was not just buying a rival but buying 5 years' worth of infrastructure development and a customer-friendly company in the market. In a single move AT&T managed to snag the only sizable competitor that could be integrated rapidly and have a high return on investment immediately on the acquisition completion date. Recently, the two companies took back their original merger application after the FCC chairman came out against the US$39 billion deal. Instead the two companies will seek approval from a federal judge, and will file another FCC application in early 2012. In the end, the long regulatory battle might see the last big telecommunications consolidation in the US, and the colossal breakup fee (US$3 billion) might be remembered as an minor footnote in the world of M&A.

May 10, 2011: Microsoft acquired Skype
With this US$8.5 billion cash deal, Microsoft consolidated its leadership position in the Unified Communications space in the enterprise market, and peer-to-peer communication in the consumer market. The Redmond-based company is finally putting to use US$42 billion out of the US$50 billion of its overseas cash reserve, avoiding the 30% repatriation tax rate. This expensive acquisition (the largest in Microsoft’s 36-year history) may seem costly today, but if the company manages to create a new, seamless communication experience across multiple screens (TV, Mobile, and PC today; plus Tablet tomorrow), this deal could be seen in retrospect as the best move Microsoft could have made in the lucrative global telecommunications industry with its trillion US dollar revenue per year. One hurdle is for Microsoft to assuage all its carriers and telecommunications partners around the world, that Skype is not a major competitor.

May 19, 2011: LinkedIn went public
From its initial public offering on the New York Stock Exchange (symbol: LNKD), LinkedIn raised US$352.8 million, offering 7.84 million shares (8.3%) of its total 94.5 million shares. After 3 years of low activity in the IPO market, LinkedIn kick-started of a new era of the social media IPO tsunami. Looking at the buzz surrounding the most stable and less risky of all “Big Five” IPO contenders (LinkedIn, Facebook, Twitter, Groupon and Zynga), investors are eager to jump on the next band wagon. Today investors prefer remembering Google and Apple stock prices rather than the Dot Com bust to make their decisions. Tech IPOs are back.

August 15, 2011: Google acquired Motorola Mobility Holdings
Google's ambition of reaching the most mobile devices on the planet has been reached and this day Google achieved what it wanted when it initially ventured into the mobile space four years ago with Android OS: to establish its name, credibility and loyalty with consumers. It is now time to convert this massive market share into a more steady revenue. Android generated US$5.90 per user in mobile advertising in 2010. But the figures are still pale compared to selling high-end phone devices (e.g., Apple makes US$370 profit for every iPhone sold). The Mountain View company has yet to find the next billion dollar revenue stream, as 97% of Google’s revenue is from advertising. With the Motorola Mobility acquisition, Google just entered a new billion-dollar business with a strong brand name. The mobile handset manufacturing business could be an interesting add-on to the core advertising business, if tighter development and integration could be done between software and hardware, somewhat like Apple. Whatever Google chooses to do with the US$12.5 billion Motorola Mobility acquisition, now it is the only mobile company that might be able to compete globally with Apple head-to-head... at least until the Windows-Nokia reboot, if all goes well.

September 6, 2011: Yahoo! fired its CEO
Yahoo! Chairman Roy Bostock fired CEO Carol Bartz. Bartz's reign lasted 32 months. CFO Tim Morse has stepped in as the interim CEO, while the company is still in search for a permanent leader (some people have already denied wanting filling the CEO position). Yahoo is currently evaluating a bid led by Silver Lake Partners and a rival proposal from TPG Capital for minority stake position in Yahoo! capital. Chinese e-commerce giant Alibaba (in which Yahoo! has 40% stake) and Japan’s Softbank Corp. (in which Yahoo! has 35% stake), are also interested in a deal with Yahoo! So 2012 might just be the year when Yahoo! gets sliced up.

September 22, 2011: HP also fired its CEO
HP Chairman Ray Lane announced that the board of directors has appointed Meg Whitman as HP President and CEO. Léo Apotheker stepped down as president, CEO and Director of HP. Apotheker's reign lasted less than 10 months. HP tried multiple times to rejuvenate its splendor in naming CEO's with impressive résumés and proven competence, but have ultimately failed to raise its low share price, exposing itself to hostile take-overs. Such is a large corporation's life (and its CEOs too) in modern capitalism, to live and die by quarterly numbers.

October 6, 2011: Steve Jobs passed away
Only a few days after stepping down from his CEO position at Apple, the company he co-created over 40 years ago, Steve Jobs died. More than a CEO, a founder or an innovator, he was seen as the ultimate visionary that could make dreams come true and set the standard for beautiful, functional, user-centered devices. The industry lost a unique icon known for relentless pursuit of perfection and pushed the boundaries of an entire industry. If there was only one day to remember in 2011 in the technology world, it would be this day that Steve Jobs left us.

November 4, 2011: Groupon went public
Groupon Inc. raised US$700 million in exchange of 30 million shares (or 5% of the company's common stock), which was the largest IPO by a US Internet company since Google raised US$1.7 billion in 2004. Groupon Inc., which has over 100 million subscribers in 45 countries, sells Internet deal-of-the-day coupons for everything from spa treatments to restaurant discounts. Prior to its IPO, the “world's fastest growing company” was put under severe scrutiny from the Securities and Exchange Commission for its accounting practices. Some analysts also claimed that the company that once turned down a US$6 billion offers from Google, operates like a Ponzi scheme. According to its IPO documentation, the Chicago-based company has publicly disclosed that while it was losing approximately US$100 million per quarter, the company decided to use its later investors' money to pay off earlier investors and founders (US$940 million from the US$1.12 billion VC money). Despite all the pre-IPO negative press and mismanagement, Groupon managed to stabilize its share price to its original US$20 public offering, just in time for the holiday season.

December 9, 2011: HP’s webOS goes Open Source
After deciding to finally keep its PC business in house, HP announced that it will give away the webOS (OS created by Palm, and bought by HP for US$1.2 billion earlier last year) to the open source community. This surprising news is in fact a perfect move in the current OS war. Since Android, now tied to a handset manufacturer (Motorola), faces increasing complaints from manufacturers and possible patent attacks from competitors, webOS appears to be the next clean open source OS contender. With this move, HP is positioning itself as the front lead for the next multi-screen-one-OS strategy, leading the path to other manufacturers for mobile, tablet, printers and maybe… PC. And all of that with no resource commitment.

Source: NQLogic.com (Dec 2011)

In this year of economic crisis and political instability, the few winners in the technology space have been a small handful of internet start-ups who managed their way up and out well with impressive IPOs (with more to come next year). Similar to 2009 and 2010, the few large multinational companies with their deep cash reserves, expanded into new businesses while leaving behind their competitors. And it is tough at the top of these global corporations, where CEOs can be fired by Wall Street. NQ Logic is looking forward to seeing you in 2012.

Happy holidays to everyone.

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