Wednesday, July 15, 2015

H-P Move Highlights Disruption in Tech


Watch the changes accelerate for the incumbents, they're just as we have pointed to over the last 2 years. Aivars Lode avantce


H-P Move Highlights Disruption in Tech

Shift to Mobile Devices, Cloud Services Slows Pioneers’ Growth


By Don Clark

October 6, 2014

For several years, early pillars of Silicon Valley have felt the rumblings of change. ButHewlett-Packard Co.’s stunning decision to break itself up underscores how strong the shaking has become.
Iconic tech giants such as H-P, Intel Corp., Cisco Systems Inc. and Oracle Corp. built huge franchises as computers spread to virtually every home and company. But growth has slowed for those technology pioneers, largely because they haven’t been able to reap similar rewards from the shift to mobile devices and cloud computing, where computing power, storage and software are delivered via the Internet.
These offerings make it easier for mobile employees to get work done remotely and reduce demand for traditional corporate computing gear from the likes of H-P,International Business Machines Corp. and Dell Inc.
The disrupters include Marc Benioff, chief executive of Salesforce.com Inc., which offers business software via the Web. Salesforce is growing rapidly at the expense of rivals that sell software that customers install and run themselves.
“The old-line tech companies ”were not architected for that world,“ Mr. Benioff said. ”They were architected for the last world."When Mr. Benioff travels these days, he takes only his new Apple Inc. iPhone, no longer needing a laptop computer.
At the same time, many of the companies that became household names in the 1980s and 1990s have experienced major shifts in leadership, or are soon likely to.
Larry Ellison stepped down last month after 37 years as CEO of Oracle, though he will remain chairman and chief technology officer. Microsoft Corp. this year appointedSatya Nadella, the first CEO who didn’t participate in the software company’s early years. Intel has been operating since May 2013 under Brian Krzanich, following the abrupt resignation of Paul Otellini as chief executive.
In August, Cisco announced plans to lay off 6,000 workers —the same month CEOJohn Chambers turned 65; the company hasn’t named a successor or specified when Mr. Chambers might give up the post.
“We are moving from the past generation of leadership to a new generation of leadership,” said Joseph M. Pastore Jr., professor emeritus at Pace University’s Lubin School of Business in New York. “Until that new generation of leadership really takes hold, it’s going to be a very ill-defined, undefined moment in the industry.”
H-P’s restructuring is being led by Meg Whitman, the former eBay Inc. CEO who became CEO in 2011 following the short tenure of Leo Apotheker. She had previously rejected his proposal to spin off the PC business.
But much has changed since then, she argued Monday, supporting the notion of splitting off one company that makes PCs and printers from another selling enterprise technology. For one thing, she said, the prior plan only involved PCs and required creating a new brand; under the new plan, the entity known as HP Inc. will use the company’s current logo to sell those devices and printers, too.
Stiff competition in the tech sector, she added, has also made it more important for companies to focus on a few areas where they can excel while streamlining their management structures for rapid decision-making.
“A lot of the big-cap tech companies are facing a marketplace that is changing at a very rapid speed,” Ms. Whitman said.
H-P isn’t the only company taking radical action. EBay last week said it would spin off PayPal to shareholders by the end of next year, a step initially proposed by activist investor Carl Icahn that it had repeatedly rejected. Michael Dell took his eponymous computer maker private last year after growing frustrated with Wall Street’s attitude toward the company.
Geoff Yang, a partner at venture-capital firm Redpoint Ventures, said investor pressures are likely to become a bigger factor in Silicon Valley—particularly among tech firms whose stock has languished. “My guess is that type of thinking is beginning to become much more front and center in boardrooms of tech companies,” he said.
The old-school tech giants, with varying degrees of success, are striving to keep up with the move to mobile devices and the cloud. Microsoft, for example, recently absorbed Nokia’s mobile-phone business and is making more of its software available for Apple devices as part of Mr. Nadella’s “mobile first, cloud first” strategy. Intel is offering special subsidies to get its chips into 40 million tablet computers this year, while continuing to benefit from sales of chips for servers used by cloud services.
The chip maker, and networking giant Cisco, have also been particularly vocal about an even newer opportunity dubbed the Internet of Things—a phrase to describe the introduction of computing and communications capability to everyday devices like appliances and cars.
But such companies still face the perception that their influence has waned in shaping the future of technology, at least compared with Web natives such as Google Inc. and Facebook Inc. Google, for example, currently carries a market value of about $390 billion, compared to about $69 billion for H-P.
So longtime Silicon Valley watchers expect more spinoffs and acquisitions to try to help prop up stock prices and kick growth into a higher gear. They also expect more management changes.
“I think you’re going to see all the last-generation CEOs get swept out, even the ones that are hanging on with their fingernails,” Mr. Benioff said.

Deckchairs shifted aboard tech liner HP's services biz


Yep, the legacy vendors are in trouble cutting costs and restructuring. Aivars Lode avantce

Deckchairs shifted aboard tech liner HP's services biz

Time for that fiscal New Year rejig

By Paul Kunert

October 16, 2014

An EMEA-wide overhaul dreamed up by HP execs to lift the fortunes of the Enterprise Services division — and cut out costs — will be implemented in time for the fiscal New Year starting next month.
Under the new-look biz, ES has consolidated from nine sub-regions into four ‘super’ clusters including North (Benelux and Nordics), Central (DACH (Germany, Austria and Switzerland) and central, Eastern Europe), South (France, Italy and Iberia) and the UK & Ireland (commercial, public sector and MEMA).

As El Chan revealed recently, HP CEO Meg Whitman’s former chief of staff Jacqui Ferguson is set to replace Craig Wilson as the ES GM for the UK, Ireland and MEMA from 1 November.
The other cluster heads will include Michael Eberhardt for the central region, Sergio Colella in the south, and Enrique Solbes in the north, replacing Peter Overakker, who was regional veep for General Western Europe.
HP confirmed Overakker is to retire from the company.
Underneath the clusters will sit seven practices, in place by the start of next month, including Mobility and Workplace Solutions, Workload and Cloud Solutions, Analytics and Data Management, Applications and Service Excellence, Enterprise Security, Business and Process Services, and Industry Solutions.
The majority of the heads of the practices are still to be named, according to industry sources.
Application Business Services is to mirror the wider ES structure, and as such, Tony Deegan, who is veep for central and local government at integrator CGI is set run the UK and Ireland unit, and MEMA.
This means he effectively replaces Jan van der Vliet as the head of ABS UK and Ireland, Paul Jennings, who runs the ABS in UK and Ireland public sector, and Soji Skariah, who controlled ABS for MEMA.
ES is in cost cutting mode across EMEA, implementing more stringent policies toward travel, overtime, recruitment, customer implementation and redundancies.
The division reported a seven per cent fall in turnover to $16.88bn in the first nine months of the current fiscal, but pre-tax profits bounced to $429m, up from $424m in the prior comparative period. 

Sap Lowers Earnings Outlook


When will it stop? The market for SAP / oracle solutions is saturated. Aivars Lode avantce

Sap Lowers Earnings Outlook

Despite Reporting Profit Increase for Third Quarter

By Christopher Alessi

October 20, 2014

FRANKFURT—Business software provider SAP SE lowered its earnings outlook for this year Monday despite reporting a 15% increase in third-quarter net profit, boosted by growth in subscriptions for its cloud-based software products.
The German company said it expects its full-year operating profit to be in a range of €5.6 billion to €5.8 billion, compared with a previous forecast of €5.8 billion to €6 billion. The company anticipates short-term pressures on margins and less upfront revenue as it refocuses its business on cloud-based software technology. SAP uses its own accounting method for the guidance, which isn’t in line with international financial reporting standards.
Net profit for the period ended September 30 was €880 million, compared with €762 million during the same period last year, beating analyst expectations. Analysts had predicted a profit of €808 million, according to a recent poll by Dow Jones Newswires.
Total revenue rose 5% to €4.25 billion from €4.05 billion a year earlier, with cloud revenue rising 45% to €277 million from €197 million.
“We are raising our cloud revenue outlook thanks to stronger than expected, organic cloud performance,” said SAP CEO Bill McDermott on a conference call Monday, citing accelerated adoption of its real-time HANA database platform. The company, which said it has over 4,100 HANA customers, increased its cloud outlook for 2014 to be in a range of €1.04 billion to €1.07 billion, using non-IFRS reporting measures, and raised its cloud revenue outlook.
SAP has in recent years actively shifted its business focus away from on-site software offerings to cloud-based products, which deliver software online to business customers.
As SAP moves further into the cloud, its revenue will increasingly be distributed over longer contract periods and be based less on one-off licensing fees for on premise software, contributing to the company’s lowered guidance for 2014, SAP executive board member Bernd Leukert told The Wall Street Journal.
“In the long run, this is a more healthy business,” Mr. Leukert said.
SAP agreed last month to buy for $8.3 billion U.S.-based Concur Technologies Inc., which produces cloud-based travel and expense management software. The acquisition will make SAP the second-largest enterprise cloud-service company by revenue behind cloud computing company Salesforce.com Inc. Despite paying a high price, Concur could bring SAP cloud revenues of more than €2 billion next year, according to analysts at J.P. Morgan.
The company’s most recent outlook didn't include potential contributions from the still-unfinished deal with Concur.
Other cloud-oriented acquisitions by SAP include human-resources application SuccessFactors, e-commerce application Ariba and workforce management software manufacturer Fieldglass.
But the centerpiece of SAP’s cloud portfolio continues to be its flagship HANA software, a high-speed database that allows customers to store, access and analyze information in real-time. SAP’s cloud strategy depends on its ability to successfully harness HANA to offer core enterprise software products like Business Suite in the cloud, analysts say.
SAP faces competition in the cloud from its longtime rival Oracle Corp. The U.S.-based software provider, which recently announced plans to acquire field services cloud software provider TOA Technologies, reported cloud revenue rose 37% to $337 million in its most recent quarterly earnings report last month.
SAP’s continued expansion into the cloud technology arena comes on the heels of a management reshuffle last spring that saw Mr. McDermott promoted to sole CEO. He is the first American to lead the company.

IBM Woes Point to a Fresh Overhaul


More legacy bloodshed. Aivars Lode avantce

IBM Woes Point to a Fresh Overhaul

CEO Disappointed With Results; Revenue Declines for 10th Straight Quarter

By Don Clark

October 20, 2014


International Business Machines Corp. , two decades after successfully shifting its focus to software and computer services from hardware, is showing signs of needing another overhaul.
On Monday, the computing and software giant abandoned a longtime earnings target, reported sharply lower third-quarter profit on a surprising 4% downturn in sales, and said it would divest semiconductor operations that underpin much of its remaining computer business.
The downbeat earnings and revenue picture sent IBM shares 7% lower and added to jitters about demand for high-tech products and services following weak results at heavyweights Oracle Corp. ,Hewlett-Packard Co. , and Cisco Systems Inc.
“Our results this quarter were disappointing,” IBM Chief ExecutiveVirginia Rometty said after disclosing the weakness in services and software and a large write-down to divest the semiconductor unit. “We’ve got to reinvent ourself like we’ve done in prior generations.”
It was IBM’s 10th consecutive quarter of flat or declining sales. The results stood in contrast toApple Inc., which on Monday posted a 13% profit increase on strong September sales of its larger-screen iPhones.
The Armonk, N.Y., technology giant said it no longer expects to earn at least $20 a share next year, a forecast it has maintained for five years and under two chief executives. IBM didn’t offer an estimate for next year, saying it would offer a new outlook in January.
Its shares fell to a three-year intraday low before recovering a bit to finish down $12.95 at $169.19.
Ms. Rometty and other executives insist the focus on services remains the right one, saying IBM must make its software and services offerings more competitive.
“We continue to evolve services, the same way we continue to evolve what our clients want in software,” said Martin Schroeter, IBM’s chief financial officer, in an interview.
Analysts and customers say IBM’s cloud push and efforts to use its depth and breadth to sell big projects that can help change a customer’s business is running out of runway.
The massive overhauls are giving way to lower-cost services built in the “cloud,” using data centers assembled for that approach byAmazon.com Inc., Google Inc. and others.
Behrooz Najafi, vice president of information technology at Questcor Pharmaceuticals Inc., said he hasn’t used any IBM technology in quite a while. He said IBM is an “old technology company” that is going through a rapid move away from its fading hardware and manufacturing businesses and into cloud computing and software.
IBM has raised its cloud-services profile by acquiring SoftLayer for $2 billion in 2013 and announcing plans to spend $1.2 billion on additional cloud data centers.
Analysts say the effort has been late and impinged on IBM’s efforts to sell its pricier infrastructure services.
In addition to cloud computing, the company has sought to make up for slow growth in services by investing in two promising areas.
One is deriving insights from data generated by customer operations, so-called big-data analytics. The company has invested $16 billion in analytics acquisitions since 2005, and in September it rolled out Watson Analytics, a suite of data-analysis services aimed at small to medium-size businesses.
Another area where IBM is trying to create momentum is artificial intelligence.
Its Watson artificial-intelligence platform made a big splash by winning the television game show Jeopardy in 2011, yet efforts to commercialize that technology have been slow to bear fruit.
IBM has sought to improve profitability by exiting low-margin businesses, such as the recent sale of its commodity server business to Lenovo Group Ltd.
Transferring its semiconductor unit to Globalfoundries Inc. also would reduce the expenses associated with staying abreast of new chip production and design technologies.
IBM agreed to pay the semiconductor company $1.5 billion to take over its chip manufacturing and employees. Under the agreement, Globalfoundries will continue to produce the processors used in IBM systems. IBM also took a $4.7 billion charge to earnings for the divestiture.
IBM’s hopes for a turnaround was based on the assumption that customers would pay it to run their computing operations and help exploit business software. It was a strategy that has served IBM well for nearly two decades.
Ms. Rometty, who became CEO in January 2012, has tried to modernize the company’s services offerings to emphasize faster-growing parts of the market.The move to services, starting in 1993, “was a great move at the time, it saved IBM,” says Erik Gordon, professor at the University of Michigan’s Ross School of Business. But he makes a play on the title of a book, “Who Says Elephants Can’t Dance?” by former IBM CEO Louis Gerstner Jr. , about its 1990s-era transformation. “It’s time for the elephant to learn a new dance,” Mr. Gordon says.
She also dispensed with an unprofitable part of the business, running call centers on behalf of companies.
“IBM has great assets in terms of experience in complex enterprises, but the question is: How quickly can they move within the next year to get well positioned? Amazon has everybody on their heels,” said Vince Kellen, chief information technology officer at the University of Kentucky.
The challenges are apparent in its latest results: IBM posted a 2.9% decline in revenue from services.
While cloud-based revenues grew, the company cited a slowdown in signing contracts to manage large installations of business software, a market with fierce price competition.
Total revenue from IBM’s computers and semiconductor operations fell 15% in the third quarter.
Revenues from mainframes were off 35%, while other computer equipment fell 12%, both over a year earlier.
In all, IBM reported net income for the quarter ended Sept. 30 of $18 million, or 2 cents a share, compared with profit in the year-earlier quarter of $4.04 billion, or $3.68 a share.
Revenue fell to $22.4 billion from $23.3 billion a year earlier.
IBM said profit excluding items such as acquisition-related charges and retirement-related costs came to $3.68 a share. Analysts had expected earnings on that basis of $4.31 on revenue of $23.37 billion.

IT customers win big in the cloud pricing wars


Customers win in the cloud pricing wars. Scary for incumbents... just look at IBMs results. Aivars Lode avantce

IT customers win big in the cloud pricing wars

Competition to offer cloud services is heating up. Here's how to take advantage of the cloud pricing battles -- even if you have no interest in adopting these technologies.
By Patrick Gray

October 16, 2014

A strange thing is happening in cloud computing: pricing continues to drop even as more competitors enter the fray, and the functionality available increases. For smaller companies or limited-use cloud applications, pricing may be the ultimate in affordability: free. An interesting confluence of factors has created this unique period in cloud computing.

Cloud gets nasty

From a vendor perspective, the cloud is a tough place in which to operate right now. Cloud services generally favor startups that have designed their offerings from the ground up to perform successfully in this environment. Where it might take tens of millions of dollars for an entrenched ERP software vendor to make their offering available on the cloud, it might take a few months and a hundredth of the cost for a startup to offer a compelling subset of the functionality in a cloud format. Furthermore, the wide availability of basic infrastructure ranging from hardware to databases lets new entrants stand on the shoulders of other cloud providers.
The big vendors simply can't ignore cloud computing and are tripping over themselves to offer cloud-based products. However, they're forced to compete on pricing with these new entrants, essentially bringing high-powered enterprise functionality down to a commodity-pricing model. It's as if every retailer in the world suddenly decided it had to compete on price with Walmart, but couldn't dramatically change its product mix.

The customer wins big

This competition on functionality and pricing has resulted in real bargains for enterprise technology consumers. Even if your company is not ready to make the leap into cloud, offerings from competitors, or interestingly cloud-based offerings from your traditional software vendors, can provide a leverage point when renegotiating pricing. Some of the major vendors are even beginning to price their traditional software offerings similarly to cloud providers, using a usage-based metric that allows companies to buy software on an as-needed basis rather than monolithic blocks of licenses.

Price shopping is critical

Even if you have no interest in adopting cloud technologies, now is a great time to shop around and investigate pricing, especially with your current vendor's cloud offerings. If you find yourself negotiating the same style of contract, with the same terms you were offered five or seven years ago, you may be leaving money on the table. Even without price shopping, vendors may be willing to offer different terms, perhaps going so far as to bundle licensing, maintenance, and bundling costs into a per-user, per-month model similar to most cloud providers. Increasingly flexible financing and competition from cloud providers have made these arrangements far more possible.

You can't ignore cloud

Cloud computing is not without challenges, but the speed of implementation and flexible pricing can no longer be ignored. Even if you are adamantly against using cloud for compelling and rational reasons, it's worth investigating the various offerings, prices, and delivery models, which represent the future of software delivery. While many traditional vendors will struggle to adapt to this new reality, enterprise software consumers will strongly benefit.

Juniper Networks Profit Meets Views But Offers Bleak Guidance


Yet another legacy company hitting the skids. Aivars Lode avantce


Juniper Networks Profit Meets Views But Offers Bleak Guidance

Networking Equipment Company Saw Weak Demand

By Tess Stynes

October 23, 2014

The networking equipment company also announced initiatives to reduce costs by an additional $100 million. The company didn’t provide specific details but said the cost-savings effort would focus on “careful management” of headcount, improved efficiencies and prioritization of revenue-generating projects.
The Sunnyvale, Calif.-based company already has been focused on reducing costs. In April, Juniper said it reduced its global workforce by 6% and consolidated facilities in response to calls by two activist shareholders, Jana Partners LLC and Elliott Management Corp., that had pushed for Juniper to make large cuts to costs and enact programs to return capital to shareholders.

Juniper Networks Inc. provided fourth-quarter guidance that missed analysts’ expectations though the networking equipment company posted a 4.5% increase in third-quarter earnings.
For the current quarter, Juniper forecast per-share earnings of 28 cents to 32 cents and revenue of $1.025 billion to $1.075 bllion. Analysts polled by Thomson Reuters expect per-share profit of 41 cents and revenue of $1.18 billion.
Earlier this month, the maker of infrastructure for telecommunications networks lowered its already downbeat third-quarter forecast, citing lower-than-expected demand from service providers--particularly in the U.S.
The company on Thursday reported that by market, service provider net revenue fell 5.9% to $741.5 million, while enterprise net revenue declined 3.2% to $384.4 million.
“We are disappointed in our third quarter revenue results” said Juniper Chief Executive Shaygan Kheradpir. “However, the underlying long-term demand trends in networking remain intact.”
Overall, Juniper Networks reported a profit of $103.6 million, or 23 cents a share, up from $99.1 million, or 19 cents a share, a year earlier. Excluding share-based compensation, restructuring-related charges and other items, earnings rose to 36 cents from 33 cents. Revenue decreased 5% to $1.13 billion.
Juniper expected per-share earnings of 34 cents to 36 cents and revenue of $1.11 billion to $1.12 billion.

Sunday, July 12, 2015

David Einhorn’s Greenlight Says EMC Trades at ‘Sizeable Discount'


More pressure on the legacy providers. Aivars Lode avantce

David Einhorn’s Greenlight Says EMC Trades at ‘Sizeable Discount'

By David Benoit and Rob Copeland

Hedge Fund Calls Into Question Data-Storage Giant’s Corporate Structure

David Einhorn ’s hedge fund Greenlight Capital Inc. became the latest big investor to call into question the corporate structure of data-storage giant EMC Corp.
In Greenlight’s quarterly letter to its investors Wednesday, Mr. Einhorn wrote that EMC trades at a “sizable discount” because of its conglomerate-like structure of several businesses that “essentially operate as independent companies.”
EMC runs three businesses under what it calls a “federation strategy.” There is its traditional data-storage business, its 80% stake in VMware Inc., a pioneer in computer-server software, and software-development company Pivotal.
Greenlight made a new “medium-sized” investment in EMC, according to the letter, which doesn’t disclose the specific size of the stake. As of the end of June, Greenlight owned 5.9 million EMC shares worth about $171 million, according to an earlier filing.
The Hopkinton, Mass., company was already under pressure from activist investor Elliott Management Corp., which had taken a more-than 2% stake and called for it to split up. EMC’s market value currently stands at nearly $60 billion.
Separately, Mr. Einhorn has previously warned of a market bubble, particularly in technology stocks, and wrote Wednesday that he was increasing his short positions in what he termed “bubble basket stocks.”
He also teased a potential short position in Amazon.com Inc., though he stopped short of explicitly saying he was betting against the shares.
“One of the principal bullish assumptions supporting many bubble stocks is, ‘the company is growing too fast to be very profitable,’” he wrote. Amazon “is just one of many stocks for which this narrative will ultimately prove false.”
Mr. Einhorn also disclosed a stake in coal mining company Consol Energy Inc.

Vista to plow big equity check into Tibco Software


Let's see what Tibco is worth in 4 years time? Aivars Lode avantce

Vista to plow big equity check into Tibco Software
By Luisa Beltran
November 7, 2014
Vista Equity Partners isn’t skimping on its buy of Tibco Software.
The technology-focused PE firm is investing $1.6 billion equity into its takeover of Tibco, according to a report from Moody’s Investors Service. The $1.6 billion equity comes to about 38 percent of the transaction’s $4.2 billion value. This is higher than the typical PE equity investment, which ranges from 28 to 30 percent.
Tibco, however, will be highly leveraged. The company’s initial debt is “very high” at about 11x total debt to EBITDA, Moody’s said. That will likely drop about 7x once cost savings, which are expected to be “meaningful,” are included, said Raj Joshi, a Moody’s analyst.
Moody’s also gave Tibco a ‘B3’ corporate family rating because of its “weak financial profile and significant execution risk in achieving planned cost savings over the next 12 to 18 months,” the report said.
“B” ratings are considered speculative and are subject to high credit risk, Moody’s said. B2 is more speculative than B1, while B3 is the most speculative, Moody’s has said.
Regulatory pressure likely spurred Vista to invest 38 percent equity, one private equity executive said. Tibco’s 11x is higher than the 6x leverage ceiling called for in guidelines issued by regulators last year. “Regulators are scolding banks for high leverage multiples, so I’m sure Vista wanted to put in more equity to make it less of an issue,” the source said.
Joshi said Tibco’s 38 percent equity may be a response to the deal’s high purchase price multiples, which are about 17x EBITDA before cost savings. But once cost savings are added, the purchase multiples decline significantly, Joshi said.
Vista Equity announced its buy of Tibco Software in September. The Palo Alto, Calif.-based company provides infrastructure and business intelligence software. Tibco reported $1.08 billion in revenues for the 12 months ended Aug. 31, 2015, Moody’s said.
Vista’s investment is coming from its fifth fund, according to an FTC regulatory filing. However, the private equity firm will likely use another fund in addition to Fund V to back its investment in Tibco, a different source said. Vista Equity Partners Fund V closed last month on about $5.8 billion and is Vista’s largest PE fund to date. Fund V is bigger than its fourth flagship fund, which collected $3.5 billon in 2012. The firm’s third pool raised $1.3 billion in 2008.
Performance data for Fund IV, a young pool, was not available. Vista’s third fund was producing a 31.6 percent IRR and 2.46x total value multiple as of June 30, according to the Oregon Public Employees Retirement Fund.
Tibco declined comment. Vista could not be reached comment.

Horton Hears a Hadoop: Tech IPO Shows the Future of Databases


Open systems companies, IPOing here we come. Aivars Lode avantce

Horton Hears a Hadoop: Tech IPO Shows the Future of Databases

Hortonworks, a Data-Platform Maker Founded Three Years Ago, Files to Go Public

By Elizabeth Dwoskin and Deborah Gage

If Big Data becomes a mainstream for business any time soon, it may be due in part to free software with an unusual name.
The software known as Hadoop took a step toward that future Monday with a filing for an initial public offering by Hortonworks Inc., a company valued at $1.8 billion and founded a little more than three years ago by Yahoo Inc. engineers and backed investors Benchmark, Index Ventures, Teradata Corp. andHewlett-Packard Co.
Yahoo is the top outside investor, holding 19.6% of company shares, and it is also a significant customer, according to the filing. Hortonworks’ filing laid out its goal to transform the way companies store and process data, a market expected to be worth $32 billion dollars in three years, according to IDC.
Hortonworks declined to comment on its IPO.

Both Hortonworks and its better capitalized, venture-backed rival, Cloudera, are riding the exponentially growing wave of data. Both companies have staked their business on Hadoop, an especially efficient open-source approach to storing and searching through large amounts of information.
Hadoop isn’t an acronym, but the name of a toy elephant of the child of the Yahoo engineer who founded Cloudera.
Hortonworks’ business model is more dependent than others’ on open-source software—meaning the software itself is free, but the company charges for regular updates and other services. Rival companies maintain some open-source software but sell proprietary add-ons as well as services.
Today, many large U.S. enterprises are producing more data than they can manage and keeping more than they used to discard. Thanks to a large marketing push by Hortonworks and its rivals, Hadoop is catching on as a relatively inexpensive way to house the information for future uses. The technology ultimately could be used for large-scale data mining, such as optimizing supply chains or targeting advertisements.
However, many companies lured by that promise have found the technology difficult to use. David Gleason, an executive of Bank of New York Mellon who has tested Hadoop, said in a recent interview the technology wasn’t “ready for prime-time.”
Hortonworks and Cloudera are trying to overcome that challenge by integrating Hadoop with more familiar technologies, including those from Microsoft Corp. and Teradata, a traditional data warehouse.
The biggest challenge to Hortonworks may be Cloudera’s partnership with Intel Corp. In May, Intel invested $740 million in Cloudera, which has raised more than $1 billion at a valuation of about $4.1 billion. Intel is integrating Hadoop into its chip sets. Similar to Intel’s previous investments in open-source software vendors VMware Inc. and Red Hat Inc., the bet is that in a few years, this will be a commonplace technology.
Hortonworks’ IPO filing shows both the opportunity and the challenges. The company’s revenue has more than doubled in the past year, while operating expenses and losses also have roughly doubled.
For the nine months ended Sept. 30, revenue was nearly $33.4 million, compared with nearly $16 million for that same period in 2013. But losses were also substantial and growing—$86.7 million in the first nine months compared with $48.4 million in 2013.
Eric Baldeschwieler, a Hortonworks co-founder who was the company’s CTO until he departed last year, acknowledged it was still early days. However, signs in the market were positive, he said. “We’ve seen companies move from pedestrian use cases at small scale to exciting use cases at a large scale,” he said.
Cloudera CEO Tom Reilly said in an interview that his company wasn’t yet ready for an IPO, although its revenues and customer numbers were double those of Hortonworks, which said it had just under 300 customers, including partners. Cloudera was also losing money, but at a lower rate, he said. “We would like to be a public company, and we will do it on our time,” he said.
Unlike Hortonworks, which received a sizable portion of its revenue from its partnership with Microsoft, Cloudera’s revenue came entirely from paying clients, Riley said.
Another Hortonworks rival, MapR, has said it would go public next year.

Vista Equity takes unusual risks with private equity fund


As we discussed, this deal is difficult to see how it works, but we will know in 5 years time. Aivars Lode avantce

Vista Equity takes unusual risks with private equity fund

By Greg Roumeliotis
Tue Nov 11, 2014 1:00am EST

Vista Equity Partners has worked in an unusual clause in its contracts with private equity fund investors that gives it more financing flexibility and a leg up in leveraged buyouts, but also carries more risks for it and its investors, according to people familiar with the matter.
The agreement allows Vista to temporarily finance large corporate buyouts just with the cash from its $5.8 billion fund, as against using both debt and equity to buy companies. Under the right circumstances, this flexibility allows Vista to be nimble in auctions and secure the best possible debt financing after it has clinched a deal.
Two months ago, Vista used the clause in one of the largest private equity deals of the year, committing to fund the $4.2 billion takeover of TIBCO Software Inc with equity. One day later, it secured debt commitments from JPMorgan Chase & Co and Jefferies LLC for the deal, reducing its equity exposure to $1.6 billion.
The maneuver helped it not only outbid rival Thoma Bravo LLC in the TIBCO auction, but also use JPMorgan and Jefferies, which where were originally backing Thoma Bravo during the auction and were offering better financing terms, the sources said.
Investors in the Vista fund, known as limited partners, include some of the largest U.S. public pension funds, including the New Jersey State Investment Council and the Oregon Public Employees Retirement Fund. These funds do not disclose to their members and retirees all the risks they undertake, because the agreements with Vista and other private equity firms are confidential. The revelations highlight how important aspects of the investment of public money in private equity are shrouded in secrecy.
Representatives for these pension funds declined to comment.
Public pension funds have invested more money in buyout funds in recent years in a search for yield amid persistently low interest rates. Private equity accounts for 9.4 percent of total public pension fund investments and has delivered a 12.3 percent annualized return to the median public pension over the last 10 years, more than any other asset class, according to the Private Equity Growth Capital Council, the industry’s lobby group.
Several pension fund investors, private equity placement agents and lawyers interviewed by Reuters said Vista’s terms are highly atypical and not widely known even within the private equity industry. Most firms have caps – usually around 15 to 20 percent of the fund – on how much equity they can commit to a particular deal. Private equity funds also rarely make all-equity commitments for such deals, preferring to tie up debt financing ahead of time. When they do make such all-equity commitments, the equity checks tend to be much smaller.
The reason is that doing so poses the risk that investors see their entire capital tied up in one investment, potentially hurting returns and denying them the benefits of diversification, these industry sources said.
Such a situation can arise, for example, if the debt market conditions were to suddenly sour, as it happened in the summer of 2007 before the financial crisis. In the TIBCO deal, Vista’s financial liabilities are capped at $275.8 million. But if the banks walk away before the deal closes, TIBCO can try to force Vista to close on the deal with its fund.
“It’s a bit like walking on a wire without a net,” said Alan Klein, a partner at law firm Simpson Thacher & Bartlett LLP.

U.S. to Spend $425 Million on Supercomputers


China is now providing competition to the USA. Aivars Lode avantce

U.S. to Spend $425 Million on Supercomputers


By Don Clark

Energy Department to Install Two IBM Systems, Invest in ‘Extreme Scale’ Technologies


The federal government said Friday it will spend $425 million to advance supercomputer technology, the latest sign of its determination to leap frog China in a field often linked to national security and economic competitiveness.
The U.S. Department of Energy plans to install two International Business Machines Corp. systems valued at $325 million at Lawrence Livermore National Laboratory in California and Oak Ridge National Laboratory in Tennessee The project, called Coral, also includes Argonne National Laboratory. The machines, which will incorporate technology from chip maker Nvidia Corp. , will carry out calculations five to seven times faster than the most advanced U.S. systems now in use, the department said.
Another $100 million will go toward developing “extreme scale” supercomputing technologies as part of a program titled FastForward 2. Illinois-based Argonne would pick a supercomputer under the Coral program later, the agency said.
Supercomputers, room-size systems that comprise thousands of microprocessor chips, perform tasks that include simulating nuclear explosions, cracking encryption codes, projecting climate trends and locating oil deposits. China’s 2013 success in building a system that topped a closely watched ranking of computer performance—interrupting years of U.S. dominance—prompted calls by U.S. scientists for greater government support.
Energy Secretary Ernest Moniz, who announced the projects Friday at an event in Washington, D.C., said in prepared remarks that they would foster “transformational advancements in basic science, national defense, environmental and energy research.”

IT buyers calling it quits with Silicon Valley


So you guys in private equity that are buying software companies,  what do you think of this? Aivars Lode avantce

IT buyers calling it quits with Silicon Valley
By Matt Asay November 12, 2014, 3:17 PM PST //
As enterprises discover the need to build their own software, they're ending the romance with Silicon Valley vendors.
Once upon a time, vendors developed and sold software and enterprises bought it. Companies like Oracle and Microsoft grew up in such halcyon days and minted billions of dollars in profits for their troubles.
That was then, this is now.
Today's enterprise is increasingly assertive, building their own software and, in a small but growing trend, releasing it as open source and inviting others to contribute. Just ask the CEO of Under Armour.
"We are a software company"
Entrepreneur and investor Marc Andreessen was rightto declare that "software is eating the world." In a nutshell, Andreessen argued that technology was no longer something external to a business; it was core, not complement. As such, every company had to be in the business of developing innovative technology.
Under Armour CEO Kevin Plank got the memo.
In an interview with Businessweek, Plank insists that he has no plans to outsource technological innovation to Silicon Valley:
"I'll be damned if I'm going to cede anything to Silicon Valley or any other technology company, because I believe we are a technology company. And if the phone is going to get integrated into the shirt, should that be a technology company making apparel or the apparel company starting to make technology? I choose the latter, and that's exactly where I'm pushing my company."
He's not alone.
For example, while we like to talk about Hortonworks filing its S-1 to go public on the back of market adoption for Hadoop and other big data technologies, the more interesting news is "Barclays Bank...work[ing] with Commonwealth Bank of Australia on the development of open-source tools for analysing large data sets." When banks or other IT buyers stop buying and start sharing between themselves, cutting out the vendor middleman, that's a big market shift.
So big, in fact, that the impact of open source and other trends like cloud are dramatically changing how "software vendors" define their businesses.
As Redmonk analyst Stephen O'Grady notes:
"Vendors... will continue to point to 'software' as their primary revenue source. But the reality is that when successful companies say 'software,' they will actually mean software plus some combination of public cloud infrastructure, hardware/appliance, automated management/monitoring capabilities, hosted micro-services, and data enabled analytics. The majority of which is software, of course. Just not strictly software as we have been conditioned to think of it."
Yes, there will always be a need for software vendors, because it simply won't make sense for enterprises to build some software themselves. While it will differ from company to company, there will always be functionality that doesn't generate competitive advantage for a company, making it ripe for outsourcing to a vendor.
However, far more software will need to be written in-house.
Increasing competition for developers
All of this means that the competition for developers is about to get even worse. Silicon Valley has been on a hiring binge for engineers for years, and that same trend is about to hit the rest of the world.
Asked about recruiting, Plank was candid about his quest to assemble a developer army:
"I'll say this, sporting goods has not always had very intelligent people. We have not attracted the best and the brightest. They've gone to Silicon Valley. They've gone to Wall Street. Now, we've got a pretty powerful ecosystem that we can tap into, especially with the acquisition of MapMyFitness. I have 100 engineers, and a year ago, I had zero. I have nine Ph.D.s, and a year ago, I had zero.
"I hear people say, 'I want to go work at Google,' and I think 'What are you going to do at Google? It's a search engine.' The ability to touch people and literally change lives is incredibly relevant in a consumer-products company."
The good news implicit in Plank's statement is that developers won't need to leave the Midwest or Far East or wherever they happen to live. Increasingly, they'll be able to build interesting software right where they are, without the headache commutes up 101 or the crushing mortgages of Los Altos.
In fact, as I've previously written, "The older the industry, the more profound the change big data [and a great developer] can make."
Breaking down barriers
There has never been a better time to work in technology and, let's face it, who isn't in the technology business these days? Or rather, who shouldn't be? Forward-looking companies like Netflix are already chest-deep in technology, laying waste to more laggardly competitors like Blockbuster. Going forward, companies that embrace technology as central to who they are will win, and everyone else will evaporate into Chapter 11 obsolescence.
That's the good and bad news. It won't be pleasant for companies ill-prepared to embrace technology. But for developers, this news is only positive. With companies as diverse as Google, Under Armour, and John Deere competing for their services, developers can write their own ticket while taking home a fat paycheck.