Wall Street Beat: Tech IPOs, M&A continues to heat up

September 27, 2013 07:39 PM ETIDG News Service - Several recent IPOs and eBay's $800 million cash offer for payments startup BrainTree this week highlight what looks like a burgeoning market for tech initial public offerings and mergers and acquisitions.

On Friday, for example, Violin Memory, a flash storage maker, and RingCentral, a provider of cloud-business communications products, both went public. Last week, Benefitfocus, a provider of cloud-based benefits software solutions, and FireEye, which offers a virtual machine-based security platform, went public.

Meanwhile, Twitter announced that it plans to go public, and Chinese e-commerce giant Alibaba Group will also pursue an IPO in the U.S.

On the M&A front, following Microsoft's $7.2 billion offer for Nokia earlier this month, eBay announced it would pay $800 billion for BrainTree to enhance parent company PayPal's mobile capabilities.

Underlying both IPO and M&A activity is a strong stock market and a tech sector that has been getting stronger. Though Friday was a down day for markets as the political battle over funding heath care reform comes to a boil in Washington, D.C., overall it has been a strong year for the stock market.

The Dow Jones Industrial Average is up about 17 percent for the year, the Standard and Poor's 500 index is up about 19 percent for the year, and the Nasdaq stock market is up about 25 percent for the year.

The market for tech stocks in particular has been gaining steam, catching up to other sectors. At the end of the first quarter, the Nasdaq Computer Index was up about 6 percent for the year. Now, it's up about 16 percent for the year, and the Nasdaq Telecommunications Index is up about 21 percent for the year.

Industry insiders expect the tech IPO market to stay strong. A recent poll by KPMG found that of those tech-sector venture capitalists surveyed, more than half expected more tech IPO activity in the rest of the year. Twenty-two percent of those expected tech IPO activity to increase more than 10 percent.

"I think it's due to the market having done really well in the last four months," said Mihir Jobalia, global head of tech for KPMG Corporate Finance.

In the first eight months of the year the median return on tech IPOs was 26 percent, based on share price increases from IPO prices, Jobalia noted.

Tech companies these days are better prepared to go public than in the dot-com boom era of the late 90s, Jobalia said.

"There is a higher bar for companies to go public," Jobalia said. "The higher quality comes from having a more robust business model, better margins, and strong management teams focusing on financial management."

Reprinted with permission from IDG.net. Story copyright 2012 International Data Group. All rights reserved.

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Western Digital continues SSD efforts, acquires Virident

IDG News Service - Western Digital is continuing its acquisition spree of flash storage companies, announcing a definitive agreement to buy enterprise solid-state drive (SSD) vendor Virident for $685 million.

Virident's operations will be integrated into WD's HGST (previously called Hitachi Global Storage Technologies) subsidiary, which was acquired from Hitachi. Virident is best known for its FlashMax range of products, which include SSDs that can function as server-side memory or long-term storage, and also related software that can manage SSD storage resources in data centers.

WD is well-known for its hard drive offerings, but has been on an acquisition spree as it expands into the SSD market. Earlier this year, WD invested $51 million in Skyera, which develops energy-efficient storage systems with SSDs, and also acquired Velobit, which makes SSD optimization software, for an undisclosed amount. The company in July acquired SSD maker STEC for $340 million. WD also offers its own SSDs and has also announced consumer-grade solid-state hybrid drives that combine hard drives and SSDs.

Virident's acquisitions will aid WD's strategy to deliver highly integrated server-based storage products to data centers, said Mike Cordano, HGST president, in a statement.

SSDs are being increasingly used in the enterprise as cache, memory and cold storage. Industry observers feel the enterprise SSD market has yet to mature, as a lot of storage is still based on spinning disks like hard drives, which can be slower and more power-hungry.

The smaller size of SSDs can also provide more storage in fewer servers, and can run in-memory database applications as an alternative to DRAM. For example, Facebook replaced DRAM with flash memory in a server called McDipper, and is also using SSDs for long-term cold storage. SSD adoption is also growing as flash storage becomes cheaper and more durable.

WD said the acquisition of Virident is expected to close in the fourth quarter.

Agam Shah covers PCs, tablets, servers, chips and semiconductors for IDG News Service. Follow Agam on Twitter at @agamsh. Agam's e-mail address is agam_shah@idg.com

Reprinted with permission from IDG.net. Story copyright 2012 International Data Group. All rights reserved.

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