Google has announced its acquisition of Nest for $3.2 billion. This is Google’s biggest and most newsworthy acquisition in the Internet of Things / SmartHome space. Perhaps it forebears its intent to integrate data captured from smart sensors into its search results? More likely is the creation of multiple Google Smart Devices that are deeply integrated together through the Android operating system. An exciting possibility indeed!
Google Inc. (NASDAQ: GOOG) announced today that it has entered into an agreement to buy Nest Labs, Inc. for $3.2 billion in cash.
Nest’s mission is to reinvent unloved but important devices in the home such as thermostats and smoke alarms. Since its launch in 2011, the Nest Learning Thermostat has been a consistent best seller–and the recently launched Protect (Smoke + CO Alarm) has had rave reviews.
See the original press release here.
Most analysts have hailed Google’s recent acquisition of Waze for $ 1.3 billion a masterstroke (a minority thinks that this is going to be a botched overstretch, a la Motorola). [See some nice reports here, here and here and the Waze blog announcement here.] However, there seems to be no agreement on whether this is a strategic M&A, a pure technology acquisition or an acqui-hire. Different folks have differing opinions; IMHO, this acquisition offers Google a few advantages of each of these.
Waze navigatiescherm (Photo credit: Henk-Jan van der Klis)
A Pre-emptive strategic move: It was reported that there were several suitors for Waze, including Facebook and Apple. By spending a small part of its $50 billion plus cash pile, Google has managed to keep a key technological advancement out of the hands of the competition and this been able to maintain its pre-eminent position in the Maps market.
A technology acquisition: By definition, a technology acquisition provides the acquiring firm with a technology or technological knowhow. Waze will enable Google to add a critical element to its Maps technology – real-time, crowdsourced updates. A weakness of all the major players in the Maps market has been the need to spend millions of dollars to periodically update the maps for accuracy in a rapidly changing world (cue the Apple Maps disaster). Waze will augment Google’s efforts by providing a cheaper option for map updates as well potential future monetization through location based advertising.
An acqui-hire: While the technology artefact represented by Waze is impressive indeed, Google will also benefit from the knowledge residing within the employees of Waze. Google has committed to maintaining the Waze R&D team in an ‘as is’, independent state, thus ensuring continuity of tacit forms of individual and group level knowledge. This will maximize the potential innovation outcomes from the Waze R&D team, and Google will be able to benefit from potential knowledge spillovers to its own R&D centres (some of which are located relatively nearby). [It is reported that Waze employees have been offered nice retention bonuses to stay for 4-5 year post-acquisition, thus maximizing the time for spillovers, knowledge transfer, and innovation.]
Overall, the Waze acquisition provides Google with several benefits which will enable it to possibly dominate the ‘Lo’ portion of the next big battlefield – The SoMoLo Convergence.
A report by PricewaterhouseCoopers regarding acquisitions by technology firms in Q2 of 2012 reaffirms a trend seen last year – technology firms are making lesser acquisitions, of greater size. Thus Technology Acquisitions are continuing to grow in size (by value), but reduce in numbers.
The number of technology deals in the second quarter decreased 35 percent, while total spending increased 19 percent compared to the same period last year, the report said.
via a Bloomberg note on the Q2 report, which is found here.
Another Bloomberg article on the 2011 report can be found here.
Technology companies spent $125 billion in deals in 2011, up 17 percent from the $107 billion spent in 2010. There were 308 deals in 2011, a drop of 21 percent from the prior year.
Amazon.com has acquired Kiva Systems, the manufacturer of warehouse automation robots that are used to great success by Gap, Office Depot, Quidsi and Zappos, among others. The last two of these were acquired by Amazon over the past year.
Kiva’s orange robots, which can slide under shelves and bins of products, are used by Quidsi Inc. — the company behind Soap.com and Diapers.com that Amazon acquired for about $545 million last year.
Image via Kiva Systems
Under the terms of the agreement, which has been approved by Kiva’s stockholders, Amazon will acquire all of the outstanding shares of Kiva for approximately $775 million in cash, as adjusted for the assumption of options and other items. Subject to various closing conditions, the acquisition is expected to close in the second quarter of 2012.
Some videos with Kiva robots in action are below:
Small mobile robots are being increasingly used to automate labor-intensive processes across various industries and are a harbinger of a future of automated, agents with distributed intelligence that can communicate with one another to accomplish large tasks.
Read more at Amazon Media Room: Press Releases and Amazon Acquires Kiva Systems in Second-Biggest Takeover – Bloomberg.
Cognizant’s CFO says that their acquisition strategy is to acquire specific technology and service skills, competencies and capabilities through focused, small-sized acquisitions. The maximum size of these acquisitions is $200 million – 3.3% of its approximately $6 billion revenues. Cognizant’s acquisition of Zaffera is the most recent in a series of such strategic acquisitions aimed at gaining specific knowledge.
Our acquisition strategy is towards very targeted tuck-in small deals which are targeted towards geographic expansion, building industry expertise and lastly, to acquire technology and services capability. For example, our PIPC acquisition was a very targeted acquisition. PIPC has expertise in large program management capability. It also had geographic presence in the UK and Australia. It has helped us in getting large development projects. Our sweet spot is $20-80 million deals and at the upper end it is $200 million. It is far easier to integrate.
Image via Business Today
via Cognizant’s CFO on acquisition strategy – Business Today – Business News.
IBM is looking for acquisitions to augment its current competencies, knowledge and products. These acquisitions, in the range of $100 million to $300 million, are rather small relative to the behemoth’s $100 billion turnover.
the company looks for deals that can augment products it already owns. For example, the statistical-analysis software company SPSS Inc., which IBM bought in 2009 for about $1.2 billion, complements the company’s 2007 acquisition of Cognos Inc., whose software creates executive “dashboards” for quickly perusing business data.
SPSS lends Cognos more robust statistics capabilities, and Cognos helps SPSS users visually depict their data
Image via Wikipedia
IBM has made a habit of using such acquisitions to gain capabilities –
The company has made almost 50 software acquisitions since 2006 in such areas as data analysis, e-commerce, supply-chain management and computer security
via IBM eyes mid-sized acquisitions to fuel growth – The Times of India.
Cognizant has acquired Zaffera, a New Jersey based SAP consulting firm. Through this acquisition, Cognizant aims to gain capabilities in the area of SAP Retail Consulting. Like other such focused technology acquisitions, a large technology firm (Cognizant has 118,000 employees) is acquiring a much smaller technology firm (100 employees of Zaffera), for the purpose of gaining knowledge and capabilities.
Image via Wikipedia
Cognizant will gain SAP solutions & accelerators (artifacts of best practices), knowledge about these solutions and other retail domain specific competencies (tacit knowledge) from the acquisition.
The acquisition will significantly expand Cognizant’s ability to provide industry-focused SAP consulting and software solutions to help major retailers gain better insights into their business, streamline operations, enhance customer satisfaction, and improve responsiveness to changing market conditions. Terms of the transaction were not disclosed.
Like Cognizant, Zaffera helps the world’s top retail brands navigate the rapid changes in the retail sector brought about by new technology and demographic shifts. With more than 100 professionals, Zaffera has a rich pool of highly experienced SAP retail consulting talent. To provide retailers with real-time visibility into what products are on their shelves, the rate at which they are selling, and who is buying them, Zaffera has developed a portfolio of SAP retail solutions and accelerators in areas such as business analytics, retail planning, point-of-sale (POS) integration, and store operations.
via Cognizant to Strengthen Retail Industry Capabilities with Acquisition of Zaffera, a Leading SAP Retail Consulting and Solutions Firm – Sep 27, 2011.