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.
Telstra's time at the top
Telstra’s first half results have further reinforced its place at top of the local telco food chain but how long can Telstra take its primacy for granted? Well, the $1.6 billion in profit earned during the first half of fiscal 2013 would suggest that things are tracking pretty well for David Thodey and his team. On top of that there a number of avenues for Telstra to further buttress its dominant position.
Telstra’s solid numbers essentially reflect the formidable strength of mobile network but while the telco continues to display robust growth in subscribers, courtesy of Vodafone’s well-documented network tribulations, it’s a sector that will inevitably start to slow down.
As the fixed-line phone business continues its decline Telstra has so far managed to leverage its strength in the mobile and the network services space to stay on top. On top of that the NBN payments are starting to make their mark and this is a pipeline that will only get bigger. A change of government in Canberra may cause a temporary delay but after hammering out a beneficial deal with Labor Telstra boss David Thodey should not be in a mood to relinquish any advantage in his dealings with a Coalition government.
While 4G LTE, the impending spectrum auction and the NBN continue to garner plenty of attention, the first half results also provided some insight into how Telstra’s enterprise ambitions were faring. From the looks of things, Telstra’s billion dollar investment in cloud computing is starting to bear fruit with a user base of 16,000 companies and growing. That list now looks set to welcome a significant customer with reports that Telstra is just a few weeks away from getting the Australian Department of Defence (DoD) to sign the dotted line.
The deal is worth $1 billion over six years and the latest news is a confirmation of what was essentially set in stone in October last year, when the DoD nominated Telstra as the preferred bidder for the contract. The final negotiations started then are now close to completion and with it comes another confirmation of Telstra’s diligence when it comes to sealing up the enterprise market.
As Thodey told analysts in the results briefing last week, the Cloud is no longer “a gleam in our eye” but something far more substantial. Telstra’s track record so far would testify to that resolve and locking in the DoD as a customer would be another big feather in the telco’s cap.
Why the ACCC won't mind losing to Google
The Australian Competition and Consumer Commission (ACCC) may have failed to get Google to pay for its alleged crime of misleading hapless users on the net but the competition watchdog will not be entirely displeased by its effort.
Its dogged pursuit of the search engine giant has garnered plaudits and more importantly highlighted a willingness to tackle the digital world head on. The ACCC, under the auspices of chairman Robert Sims, is a far more aggressive beast. In the past year it’s been clamping down on the telcos, taken a chunk out of Apple and is refereeing online retailers.
But despite being on a roll, the ACCC couldn’t bring Google to the heel at the High Court. According to the ruling, the court found Google to be a service and not a publisher, and therefore it was not liable for what its customers do with its AdWords service... well, at least in Australia anyway.
Regardless of the loss, you don’t see the ACCC licking its wounds and Sims should be quite proud of the group’s achievements; it took an international tech company to the High Court, and literally gave Google a run for its money.
A win for ACCC could have been devastating for Google’s AdWords business - one of its key sources of revenue. Given this, it’s no wonder that Google waited until after the ruling to unveil some new changes to its AdWords system.
The regulator’s set to get another shot limelight this year. This time it’s taking Hewlett Packard to task on an issue its possibly much more familiar with: faulty warranties. So far it seems as if HP isn’t getting out of this one. As early October last year, Hall & Wilcox’s partner Ben Hamilton argued that the company may have to pay penalties in the millions.
There's also the proceedings in the Federal Court against Visa for breaches of the misuse of markeet power and exclusive dealing provisions in the Competition and Consumer Act 2010. The claim, lodged on February 4, alleges that Visa used its market power to prevent the expansion of competing currency services to new merchant outlets in Australia, such as retail stores, while preventing businesses in Australia from supplying services on ATMs in competition with Visa's own currency conversion.
Sims may have Australia’s online economy as one of the “biggest regulatory challenges of a generation”. But all things considered, it seems as if the regulator is stepping up the challenge in style.
Dell’s buyout deliberations
Another company in the throes of a difficult transition is Dell. Indeed, turning one of the world’s largest PC makers into a competitive entity in the post PC world will be a quite a challenge.
On one hand, Forrester Research’s David Johnson contends that if Dell can cut itself free from the regulatory burdens of being a large, publicly listed company it may stand a chance at transforming itself. Johnson’s betting that Dell’s namesake, founder and current CEO, Michael Dell, has a plan for his company and the ability to execute it, like he did when it first founded the company back in 1984.
On the other hand, Paul Wallbank is a bit bearish about the move. He makes a fair point in saying that Michael Dell has been at the company’s helm since 2007 and that really hasn’t altered the computing giant’s course.
Time will tell as to whether a board and a sea of active shareholders are actually hindering the company.
But before any of that can happen, Dell will need to liberate his creation from the stock exchange and from the hands of money hungry investors.
Much of the discussion around Dell has been about its buyout plans. The whole event is playing out as expected. Now that Dell has found the cash to buyout the company for $24.4 billion, its shareholders now believe it’s worth much more.
In other news
Leighton Holdings subsidiary Visionstream has won the contract to install electronic freeway management technology along the West Gate Freeway in Melbourne, with work on the project expected to get underway in the middle of this year. Federal Infrastructure and Transport Minister Anthony Albanese said the technology will give VicRoads the tools they need to better manage traffic flows and respond quickly to accidents and breakdowns. The installation of the freeway management system is expected to be completed by mid-2014. The West Gate Freeway project is being funded by the Federal ($12.5 million) and Victorian ($12.5 million) Governments.
Sydney-based open source software services company Squiz has been approved by the Australian Government Information Management Office (AGIMO) for inclusion in its service catalogue of cloud services that enables Australian federal government departments to procure cloud services.
Huawei Enterprise, a leading global information and communications technology (ICT) solutions provider, has appointed leading IT systems availability specialists Interactive as the hardware maintenance provider for their Australian-based enterprise customers.
With additional reporting by Supratim Adhikari.