AT&T, Verizon, IBM M&A Announcements: The Real Motivations

Don Douglas**Editor’s Note: Please click here for a recap of the biggest channel-impacting mergers in Q1 2015.**

There are so many mergers happening today, you need an app just to keep up with them. What interests me the most about these deals is the motivation — are they due to typical consolidation, arbitrage or a company having too much cash, or are they are truly strategic?

Let’s take a look at some recent activity and see if we can figure out what is going on.

I personally think all of the following mergers were in the “pretty strategic” category. Still, there are lessons to be learned. Thinking about why these deals really went down gives you a good clue of where many of these companies think the market is going, so you can prepare and steer your business accordingly.

AT&T Buys DirecTV

Price: $49 billion. If you think AT&T has been fighting with the FCC for a year to close this deal just so it can make like Rob Lowe and bash the cable companies, you would not be correct. This is all about being able to deliver mobile video content. Home users are just an added benefit.

Verizon Buys AOL

Price: $4.4 billion. If you guessed Verizon is doing this to obtain the remaining 2 million or so remaining dial-up users, congrats on knowing this many people still pay for AOL dial-up service, but that would not be the correct answer. This is all about content driving wireless media and OTT (over the top) video.

Besides the mobility plays here, are these two acquisitions just strategies to get around net neutrality? Only time will tell, but it’s clear that the war to own and control your content is on!

Intel Buys Altera

Price: $17 billion. If you guessed Intel did this to move up in the phone book, you would be wrong. This is all about Moore’s Law possibly being repealed. Even if it is technically possibly to extend the chip industry’s run of constant exponential increases in power and decreases in relative cost, Intel realized it may not be financially viable to do so. In steps Altera with a loaded portfolio of intellectual property and expertise in FPGAs. This is all about Intel wanting to strengthen its technology portfolio and finding a way to increase power outside of Moore’s Law via custom silicon. (By the way, Bitfusion, one of my favorite startups, is working in this space.)

IBM Buys Blue Box

Price: Undisclosed. If you guessed Big Blue likes the similarities of the name “Blue Box,” there could be something Freudian going on there. However, IBM purchasing this provider of OpenStack0-based on-demand private clouds was actually about the fact that the private cloud is a critical piece of the ongoing retooling of IT infrastructure. The majority of the big players are opting for hybrid cloud strategies, and IBM wants to play there.

Microsoft Buys Revolution Analytics

Price: Undisclosed. If you guessed Microsoft was trying to improve its stodgy image by being attached to anything called “Revolution,” that is not a bad guess. Actually, Revolution Analytics has a distro of the rapidly growing R programming language, which is used by data scientists and many students working on statistical computing and predictive analysis. Microsoft wanted this company to beef up its data analytics portfolio. A big data war is surely coming down the road, and Microsoft appears to be adding to its cache of weapons.

Don Douglas is president and CEO of Liquid Networx, where he uses an extensive knowledge of Information Technology and Communications to assist companies in various industries around the world, including IBM, AFCE (Popeyes, Church’s, Cinnabon, Seattle’s Best), Sequa (diversified manufacturing, aerospace, chemical), Weil Gotshal & Manges (legal) and Boeing in a variety of capacities such as Programmer, Project Leader, Network Manager, Manager Enterprise Systems, and Director of IT. As President and CEO of Liquid Networx, Don’s technical background has helped to craft the company into a telecommunications lifecycle management organization with a vertical focus on IT compliance consulting and solutions. Liquid has helped more than 550 companies in the U.S. and abroad to simplify communications, reduce costs, increase productivity and raise security awareness.

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