TECH DEALS: A resurfaced Internode IPO

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.

Internode's listing trigger

It's been a busy September at Internode, first there was the management reshuffle at the start of the month that saw four senior executives made redundant as part of a company restructure, then came the debut of its fetchtv IP TV service over the National Broadband Network (NBN) last week and now the telecommunications carrier's founder and managing director Simon Hackett has revived the idea of the telco going public. The last time the idea was floated was in 2010 when Internode expressed its desire to make the transition from a private to a public company. Hackett has now confirmed that ambition telling the Australian Financial Review that telco was on the verge of going public two years ago but backed away because of market conditions. At the time Hackett had expressed a pretty relaxed attitude towards going public but his comments to the AFR would indicate that he is may be more serious about it this time around. It's difficult to put a finger on just how much an IPO will be worth but industry watchers reckon that it could potentially be worth up to $100 million and there should be plenty of investors out there willing to put their money into Internode. Interestingly, Hackett has also pinpointed a key trigger to what could lead to a listing. That trigger is the potential shift of power in Canberra, an outcome that looks pretty likely at the moment, and will have some impact on the future of the NBN. Hackett has told the paper that a Coalition victory at the next election, and its possible ramifications on the NBN, could be the ticket for a successful listing. Internode's profits have certainly picked up in the last two years and a successful IPO would provide the necessary funding boost it needs to spread its wings. However, as Hackett points out the big factor will be just what happens to the NBN. Of course a lot will depend on what happens at the polls and just what the Coalition decides to do with the NBN, after all the Gillard government still has two years to rollout the network as quickly and as extensively as it can, and then the Coalition will need to figure out a way to stop the network in a cost-effective fashion. Hackett has obviously spent some time thinking about the possible scenario, saying that if the NBN is stopped in its tracks then the case for listing becomes much stronger and the investment horizons aren't that long term to prevent Internode from going public and then invest in fibre networks. Hackett's comments will be closely watched by iiNet, given that a listed Internode armed with additional capital, could potentially start giving it a run for its money. Going public shouldn't necessarily be a cause of alarm for Internode diehards, because Hackett has made it quite clear that he would remain as the major shareholder, and the extra capital may not be a bad idea for the company if it wants to invest more money into adding more ADSL2 DSLAMS.

TPG's mobile broadband splash  

In other telco news, low cost broadband carrier TPG has made waves with its new cut price mobile broadband plans that will reportedly undercut the pricing of the big three mobile networks. The plans range from $5 for 500MB to $35 for 9GB of data per month. That's a much cheaper entry point for potential users given that Telstra's BigPond liberty plan offers 7GB of data for $40, while Optus' offer 8GB for its $40 plan. The rise of tablet PCs has made mobile broadband a competitive market and TPG's general manager of sales and marketing, Craig Levy, told the Sydney Morning Herald that TPG was able to offer up to 50 per cent cheaper prices than its rivals. TPG has made quite a mark with its prices in the fixed broadband market, although customer service isn't always up to scratch, and it will be interesting to see if it can make a similar splash when it comes to mobile broadband.

Groupon, Our Deal, and making the most of the daily deals phenomenon

Daily deals sites in Australia have never had it this good as wary consumers flock to them at the expense of bricks and mortar retailers and heavyweight investors like James Packer are investing in the sector to grab a piece of the action. However, behind all the upbeat projections of endless blue skies, both here and abroad, there are legitimate concerns about just how profitable the whole sector is? These concerns have been further exasperated in the last couple of weeks with Facebook giving its four month old deals experiment the flick and the more dramatic news of Groupon putting its blockbuster $US750 million IPO on hold. So is the daily deals bubble set to pop and what does it mean for the outfits in Australia? While the latest news will no doubt cause a few flutters down under, Our Deal founder and chief executive Julian Holman believes that the phenomenon is sustainable in Australia but there will be some rationalisation. The outfit started in May 2010 has the backing of internet investment company Netus, which is a funding vehicle partly owned by News Limited, and Ten Network Holdings, which invested in November last year, and Holman told Technology Spectator that the market needs to evolve to keep the model sustainable. That sustainability will depend on how operators further advance their technologies and personalise the experience for their members. Our Deal is one of the few outfits that cap deals at certain amount to help merchants and according to Holman, helping the merchants and making them want to come back is a critical part of making the model work.  

“The sustainability comes from how we treat our merchants and the merchants that come a second or third time to come do deals with us they then understand how the process works, and they know how to better use their business to make group buying works.” Holman said.

The local space is very competitive with almost all of the media companies having a stake in one form or the other and the relationship is a natural fit given that the deal sites can use mainstream advertising to promote their offers. CUDO, owned by Nine Entertainment and its JV partner Microsoft, advertises on the Nine Network and Ten uses its programming to spruik Our Deals to targeted audience. The important thing for the likes of Our Deal is to keep pace with the market leaders LivingSocial, Cudo and Scoopon and Holman reckons the best way to do that is to set itself apart from the clutter and become more relevant to its customers. So the trick is to get out of the current generic approach, look past the need to build extensive databases and focus on key segments and niche sectors. Interestingly, Holman adds that he has a new round of investors lined up who in his words are "super large media organisations combined" and this is exactly what Our Deals could utilise to build on Holman's strategy of crafting deals to match a specific audience.  

Local wrap

San Francisco-based business productivity software vendor, Mindjet, has signed new strategic partnerships with three local technology solutions providers – Data#3, Dimension Data and Insight. The partnerships will enable the company to expand the distribution of its information mapping software into the Australian and New Zealand market. Data#3, Dimension Data and Insight will now be able to integrate Mindjet's suite of software products, including MindManager, for Windows and Mac, into their solutions for customers. Meanwhile, leading Google Apps cloud service provider, Cloud Sherpas, has picked up Brisbane-based Devnet and is looking to set up base camp in Sydney as it looks to make inroads in the Asia Pacific region. The Devnet deal comes hot on the heels of its acquisition of New Zealand-based WaveAdept and Cloud Sherpas said in a statement that the latest buy provides it with well-connected local talent and marquee regional customers such as Technology One, Altium and Investor's Club. In cloud computing news, US data centre outfit Digital Realty Trust has paid $4.1 million to acquire its second Australian data centre facility. The 30,250 square metre site is located within the Paramount Industrial Park development, about 19 kilometres west of the Melbourne central business district. Elsewhere, Hewlett-Packard (HP) has launched its beta IaaS (Infrastructure-as-a-Service) offering, dubbed HP Cloud Services. The products, called HP Cloud Compute and HP Cloud Object Storage, will provide compute and storage resources from HP's own data centres. In other news, Australia's largest blogging network, Nuffnang, has launched Product Talk, a service designed to give public relation firms and media agencies engage with over 3,500 Australian bloggers who are interested in working with their client's brands. Dymocks is set to launch a new self-publishing platform called D-Publishing to help aspiring authors to help develop their book. The platform will allow users to upload draft manuscripts online 'and proceed to produce and publish them.

International news

The change at the top at Yahoo has been colourful to say the least, after being fired over the phone the former CEO Carol Bartz has reportedly labelled Yahoo chairman Roy Bostock and his board a bunch of 'doofuses' and it's a view that is evidently shared by some Yahoo shareholders. According to the Wall Street Journal, prominent hedge fund Third Point LLC, which recently became one of Yahoo's largest shareholder has been agitating behind the scenes for a board shake-up at the company. Triple Point now holds a 5.15 per cent stake in Yahoo and the company's boss Daniel Loeb reportedly wrote to Yahoo's board last week to castigate them for the sorry state of affairs. As the shakeup filters through Yahoo's rank and file industry watchers and analysts are already busy at work looking at what the future may hold for Yahoo. Perhaps the most comprehensive analysis has come from founder and CEO of WatchMojo, Ashkan Karbasfrooshan, who highlights a number of options in this piece in TechCrunch, ranging from a move to buy Hulu to a mega merger with a major with a media operator like CBS or Viacom. There is some talk that Yahoo may be willing to sell itself to the right bidder but it's difficult to see Microsoft coming back to have another go. The latest list of possible suitors is said to include private-equity firm Silver Lake, AT&T and News Corporation. In other news, Google has reportedly paid $US125 million for restaurant review guide and foodie bible Zagat Review. According to the Wall Street Journal, Google is expected to integrate Zagat's reviews with its popular online services such as Google Maps. Lawson Software Americas has bought continuous controls monitoring (CCM) software developer Approva Corporation. The terms of the transaction, which closed on September 1, were not disclosed. Ontario-based enterprise content management (ECM) software vendor, OpenText, has acquired fellow Canadian learning management systems provider, Operitel, to complement and extend its solutions to customers worldwide. Operitel's solutions include social and mobile learning management and capabilities that integrate with Microsoft SharePoint. Finally, Hitachi Data Systems has acquired network attached storage (NAS) specialist BlueArc Corporation in an all cash transaction. BlueArc makes high-end storage systems for managing unstructured data – files, spreadsheets, digital content and images – and the deal consummates a long partnership between the two companies.