Tech Deals is a weekly column covering the latest deals in one of the busiest sectors for M&A. To read previous articles go to our Tech Deals page.
Samsung’s bittersweet Galaxy win
Australian customers will get their hands on a Samsung Galaxy Tab 10.1 before Christmas after the South Korean giant finally managed to bury the challenge of Apple. However, there is considerable doubt whether Galaxy Tab is going to be the iPad killer that Samsung is hoping it to be.
Samsung is understandably pleased with its victory but one imagines the joy of beating Apple in court will be tinged with a dose of wistfulness. The Galaxy Tab may now be in local stores but the device is already up against a number of headwinds.
Firstly, Apple has a five month lead over Samsung when it comes to tapping into the retail market and the tech giant’s legal team can at least take some credit for successfully stalling Samsung’s retail push for a considerable period of time. Not only has that prevented the Galaxy from gaining sufficient traction among consumers, it also means that the Tab 10.1 is coming in as a mature product. The device is already six-months old and Samsung is almost certainly putting the finishing touches on the next model. Given the choice, consumers would rather wait for the new model than spend money on a product that is already on its way out.
They are going to be further dissuaded by the fact that the 16GB Wi-Fi version of the tablet will retail for $579 while the 3G-enabled 16GB will set you back $729. At those prices, the tablet is on par with the iPad and more expensive than its other Android peers. The strategy so far from Android device makers have been to offer their wares at a discount to the iPad to gain market share, and given the product maturity of the Galaxy Tab 10.1 it’s a mystery why Samsung is keen to pitch the device as a premium product. So, we will have to wait and see if Samsung will reap the rewards of persevering through a protracted patent war with Apple.
Apple’s deal with the devil
The tablet tussle in Australia may be over for now, but Apple has hit the news over the weekend for another patent-related matter, after reportedly handing over a couple of valuable patents to Digitude Innovations, a renowned patent troll, in April. Digitude, backed by private equity firm Altitude Capital Partners, is in the business of obtaining patents for the purpose of suing other companies for royalties, rather than making products, and there is talk the company and Apple may have signed an agreement to gain immunity against attacks from Digitude.
Digitude is using the mobile patents in its campaign against a host of tech outfits, including Amazon, HTC, LG, Nokia, RIM, Samsung, and Sony, but Apple is not on the list. According to VentureBeat the reprieve is a result of a cross-licensing deal that gave Digitude the necessary firepower to attack Apple’s rivals at the International Trade Commission.
The dealmaking with Digitude is believed to have taken place in April, when the company announced that it had reached a strategic partnership with one of the world's leading consumer electronics companies. The name of the electronics heavyweight wasn’t disclosed at the time but Tech Crunch reports the company in question was Apple which transferred ownership of its patent to a shell company called Cliff Island LLC.
Outfits like Digitude are widely seen as enemies of the innovation market so the question is why would Apple willingly shake hands with the devil?
Well, the deal does see Apple taken off Digitude’s hit list and there is some suggestion that Apple is using Digitude, albeit indirectly, to make life difficult for its rivals. Another alternative scenario could be that Apple decided to hand over the patents to Digitude as part of a settlement with Digitude. It's likely the truth may be somewhere in the middle. Apple isn’t exactly shy about going to the courts, especially when patents are involved, but faced with Digitude’s ransom note the tech giant may have seen this as an opportunity to raise another headache for its rivals in the smartphone market.
TPG, iiNet intrigue
In local news, the drums continue to beat about a possible move by TPG Telecom on iiNet. As mentioned in last week’s column there is little doubt that the companies are on a collision course and the idea has been further reinforced by TPG’s move to reaffirm its guidance and refinance its debt facilities until 2015, with no compulsory repayments until expiry. According to RBS Morgans analysts, TPG could tap its lenders for up to $760 million, which could make an all cash bid for iiNet a serious possibility. A potential deal will be unlikely to face excessive scrutiny from the Australian Competition and Consumer Commission (ACCC), although iiNet boss Michael Malone has hinted that he will raise regulatory hackles if and when a move from TPG eventuates. The timing of the move by TPG will be most intriguing facet of the manoeuvring between the two companies. TPG could continue to creep up iiNet’s register until that magic 20 per cent mark but Malone may counter that by beefing up his own stake in the ISP. Things could get really interesting if a third party decides to have a tilt at iiNet, which will no doubt lead to a prompt response from TPG.
eCommerce movers and shakers
Local finance and telecommunication service provider FlexiGroup has purchased online payment business Paymate for around $5 million, a move designed to give US-based Paymate a stronger hand against market leader PayPal. The move also gives Flexigroup immediate access to the high growth online payments market, which is set to grow 12 per cent to $38 billion in 2013.
Paymate, which started operations in Australia in 2001, is similar to PayPal, but credits funds directly to the recipient’s bank account. The company turns over $20 million in annual payment volumes and is easily dwarfed by PayPal which turns over more than $2 billion. FlexiGroup processes about 11 million transactions annually, and offers point of sale leasing finance through retailers such as Harvey Norman. It's hoping that its acumen can now be utilised to provide greater exposure for Paymate and steal market share from credit card providers and PayPal, which is owned by eBay.
Meanwhile, Deals Direct chairman Paul Greenberg was in an upbeat mood in his interview with Business Spectator’s Alan Kohler and Stephen Bartholomeusz last week, and in between challenging the likes of Myer and David Jones to lift their game the indefatigable Greenberg also revealed that his company’s latest offering is the online shoe site Sole Trove.com.au. According to Greenberg, the shoes space is hot at the moment and Deals Direct has partnered with a “competent wholesaler and distributor” to get the site off and running.
The online department store has been on a roll, especially since picking up that $10 million investment from James Packer’s Ellerston Capital in April. The outfit now has a presence in a number of verticals, with Supermarket Deals.com.au, group buying site Deal Me.com.au and the acquisition of Melbourne-based loyalty business Shoppers Advantage. Greenberg’s strategy for the time being seems to be a combination of building businesses from scratch and splashing out cash for the right target.
ASX-listed NewSat Limited has sealed a contract with Lockheed Martin Commercial Space Systems for the construction of the Jabiru-1 satellite. The news certainly excited investors with the specialist satellite communications company’s stock jumping over five per cent to end last week at 69.5 cents.
The construction of the Jabiru-1 satellite will commence immediately and is scheduled for launch in the second half of 2014. Jabiru-1 will provide high-bandwidth communication services to government and enterprise markets including mining, oil, gas, media and carrier-grade telecommunications, across countries such as Afghanistan, Iraq, Pakistan, Saudi Arabia, Somalia and India. The financial terms of the agreement were not disclosed. NewSat was advised on the Jabiru-1 project by ArgoSat Advisors.
Meanwhile, Brisbane-based software engineering business Intelligent Pathways has joined forces with mobile business intelligence specialist, Roambi, to launch its applications – Roambi Analytics and Roambi Flow in the Australian market. San Diego-based Roambi’s offerings are designed to give users a way to present complex data in a visually appealing way on new mobile devices. Intelligent Pathways is a reseller as well as a system integration specialist for Roambi
YouTube has bought RightsFlow, a US-based firm that manages royalty payments for songwriters and music publishers. YouTube said that the acquisition will allow it to combine RightsFlow's expertise and technology with the YouTube platform, in a win-win for content consumers and producers. Financial details of the transaction were not disclosed.
IBM has agreed to buy web-based enterprise software company DemandTec for $US440 million in cash. The company provides analytics software for retailers and is an example of the convergence of cloud-based services and data analytics. The deal closely follows the recent move by German giant SAP to buy human resource management service SuccessFactors for $US3.4 billion, and Oracle’s $US1.43 billion acquisition of RightNow Technologies.