Posts Tagged ‘acquisitions’

Could TomTom Provide the Roadmap to Success for Apple?

Sunday, February 17th, 2013

Article first published as Could TomTom Provide the Roadmap to Success for Apple? on Technorati.

Much has been written about Apple’s $135 billion in cash and the desire of some shareholders to see part of it returned. Technology companies that thrive in their heyday often face the challenges of a post-glory period when their product ceases to appeal or the market has moved on. Nokia and Blackberry (formally RIM) are recent examples of this, and Motorola is another within the mobile space.

At times such as this, a company’s cash reserve is the only thing that allows for continued investment in R&D; it enables them to try to hit the next product cycle and provides coverage for a cash flow shortfall should the company no longer have the volume to generate profits. Having cash on the balance sheet also provides a company with the opportunity to invest, through acquisition, in new technology and intellectual property to ensure enhanced offerings.

In the case of Apple, the recent debacle over the new Apple Maps app on their iPhone 5 emphasizes the fact that when they’re looking to create a new experience, Apple is better off using in-house software. Dutch navigation company, TomTom, which provides the map software for Apple, has recently been reported to be struggling as its hardware sales begin to falter. For the last couple of years the company has focused on selling their map software but they haven’t had the financial resources necessary to successfully compete against the deep pockets of Google or Nokia (Navteq).

TomTom could, however, be an ideal acquisition candidate for Apple. Within their portfolio they could provide the inspirational innovation to blend hardware capabilities with location, content (iTunes) and contextual information to create new and engaging consumer experiences that enhance the digital life of the consumer. In reality, this mapping capability is already within the portfolio of Google and Microsoft, their main rivals in the operating system space.

Steve Bell, President, KeySo Global

Why Mergers and Acquisitions Come Unstuck

Sunday, October 21st, 2012

I recently re-read the book “Unstuck” by Keith Yamashita and Sandra Spataro. The “unstuck” model focuses on the need as a leader to create balance in the system of business in order to be able to succeed. Leaders need to unify the following six elements: strategy, purpose, culture, personal interactions, structures and processes, rewards and metrics. According to the authors, the inspiration for this model came from two sources: a “classic Friday afternoon conversation” with a former CEO of HP Carly Fiorina, and David Nadler and Michael Tushman’s “congruence model” for organizational effectiveness.

At about the same time, I serendipitously came across an article in the Financial Times (HP counts cost of ill-fated acquisition – August 10, 2012) lamenting HP’s turnaround efforts and how they failed to leverage a decade of acquisitions that included Compaq in 2001, EDS in 2008 and Autonomy in 2011. This led me to review the “unstuck” model which in turn prompted me to redraw it in relation to acquisitions, as shown below.

The fundamental logic of acquisitions is usually financial, along with market share and growth, and is based on synergy of strategy. In most cases the senior management team and investment bankers make the case seem undeniably persuasive. However, the reality is that in the short term this synergy of strategy is the only element of the model that is in fact in alignment in a converged company. After the acquisition closes, all other aspects of the model can go off balance. It is a little bit like thrusting two atoms together where only one of the neutrons can survive; all elements of the model will go through a period of adjustment with the probable outcome being that the elements of the acquiring company dominate. This is not guaranteed, however; there are other possibilities, particularly in a merger, that can play out over time, including the blending of elements or the creation of a hybrid that takes the best of each of the originals to create a new component.

This behavior of acquisitions over the long term became all the more relevant in light of the recent proposed but failed merger of EADS, the makers of Airbus, and BAE, the UK defense contractor. The main thrust of their argument for merging was the ability to create an effective competitor in terms of size against the U.S-based company, Boeing. The biggest concerns being surfaced were related to the agreement of a new ownership structure and the consequential reduced political influence of the 3 governments. In theory, the new combined company would have been free to compete with Boeing, however based on the above model and perspective, I think that the challenges for this company would have been enormous and long term; not only in terms of political interference but also cultural differences as it attempted to integrate people and create a unified purpose.

Size alone does not guarantee success, particularly where multicultural aspects are embedded in the character of the company, as has been proven by HP and Daimler-Chrysler. The short term benefits of size and financial growth struggle to offset the long term challenges of balancing other elements of the model. The resulting company will often take years to achieve a rebalance. Given this scenario of multicultural challenges on the model, it is doubtful that the recently announced acquisition of Sprint by Japan based Softbank will result in instant success in the market for the company. The Japanese propensity for long term thinking and patience, however, will probably mean that the resulting company will have a better chance of success than many others. In the case of both HP and Daimler-Chrysler they never managed to achieve this; in fact the anticipated advantages from a market and financial perspective were never translated into market success nor shareholder value.

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Steve Bell, President, KeySo Global

Nokia and Microsoft – A window to heaven or 7 years bad luck?

Thursday, February 10th, 2011

In January at CES (the Consumer Electronic’s Show in Las Vegas) CNBC’s star reporter “Money Honey” Maria Bartiromo asked Microsoft CEO Steve Ballmer “What are you going to do with your $50 billion of cash? Are you going to buy Nokia or RIM?” Ballmer, of course, refused to comment. The consensus is, however, that Microsoft’s options for succeeding in the smartphone market are declining rapidly.

This week there is news that Stephen Elop, Nokia’s new CEO, has determined he and the company are on a “burning platform” and tomorrow is likely to announce a restructure of Nokia’s executive board, making it less Finnish; but more significantly, he is looking to make the company more successful, specifically in North America. Additionally, he is reportedly looking for a new head of operating systems, as well as a new head of research and development with strong software capability. This reorganization will be a major shakeup for Nokia. The question is (as was pointed out in a previous blog) will this consensus driven company that historically succeeded because of continuity of leadership make this transition, not only in strategy but culture as well?

Is this a marriage of convenience or desperation? Both Microsoft and Nokia are struggling in the smartphone arena, particularly in North America, where the latest Comshare subscriber data shows that Nokia has only 7.0% of the overall subscriber base and has no presence in the smartphone platform market. Microsoft is also desperately hanging on to 8.4% of Smartphone platform subscribers; this is compared to RIM that slipped to 31% under pressure from a rapidly accelerating Android and a solid Apple performance.

The scene is certainly set for some bold moves from a market share and business survival perspective, and this leads me to think about the outcome of potential acquisition activity. In reality the key question that should be asked is not “what are you buying?” but “what would the purchase develop into? “

The real issue is not about the strategic benefits and opportunities of such a merger, but whether or not the cultures of the companies can be positively blended. Does Steve Ballmer, in cooperation with ex Microsoft exec Steve Elop, have the stamina and fortitude to work with the Finn’s, where collaboration is more than just a word – it’s a national, cultural and management style? This culture is totally unlike most American “command and control” multinationals, and certainly nothing like Microsoft.

The probability is that tomorrow Stephen Elop will announce a close partnership with Microsoft on Windows 7 and next generation smart device operating systems. This will allow both companies to gain experience of each other, similar to an engagement. The final outcome of this is experimentation and open to speculation, but the reality is that, together or apart, the 2 companies are unlikely to be the dominant forces they were or currently are.

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