- June 11 2013: Google acquires Waze Inc., beating off competition from Facebook but now faces regulatory investigation.
Like a sporty kid who adds yet another trophy to their cabinet, Waze has become the latest high value internet brand to join the Google family. Waze, an Israeli real time traffic data service start-up has been acquired by Google for a cool $1.1 billion (which I think is slightly overvalued if you benchmark to something like Foursquare), beating off rival competition from Facebook. For the non-tech people among us, Waze's is an app that connects and allows its 47 million users to share information whilst on the road to alert other drivers of traffic congestion or road hazards. By doing so, Waze suggests alternative routes. But users need not to actively contribute as Waze picks up road conditions (driver speed, routes, location etc.) and alters i's maps to guide the whole Waze 'community', all in real time. There are also some social media functions on Waze, allowing users to track locations of Facebook friends or other colleagues. All-in-all, it is a GPS navigator, at the frontier of map app technology with extra frills.
And what's in it for Google? Well, at the basic level, I would say that the acquisition of Waze and therefore its technology can help Google to enhance its already advanced mapping products with real traffic data time data. The acquisition means that Waze's services can be incorporated into Google Maps and perhaps other Google products, which do not currently have real time user traffic data. As well as this, Waze's social media functions can help Google make a stronger mark in this area; combining Google + functions into Waze is a plausible idea. Of course, Google is also an advertising company and Waze provides a huge stage for generating advertising revenues by attracting local businesses to market themselves on the map. Google's long term plans with Waze are unknown but for now, Google has stated that the two will be kept as separate units, amid regulator probing (see below). Given that consumers are increasingly adopting mobile devices and with the rise of 'phablets', location services/applications have become a primary area of focus for Google as well as other tech giants.
Of course, the acquisition of Waze also gives Google a good wedge of the millions of consumers who already use Waze on iOS. More importantly for Google, the acquisition means that it can block competitors' use of Waze's data. For example, Facebook who is looking to develop its own mobile apps will have to use 3rd party data for any location based apps. To me, the value of this to Google is huge; maps form an integral component of the mobile ecosystem and mobile mapping heavily influences revenue generation by bringing in advertising and other social tools/apps. Google, with its huge cash reserves is playing a clever game by buying and blocking, rather than building upon Waze's technology to create its own real time mapping product.
Waze's chief executive Noam Bardin noted that the firm explored many options (acquirers including Facebook and Apple) but found Google to be the winning choice. I would say that Google's weapon is likely to be cash, (who have a $50 billion spending power) whereas Facebook was offering stock. Terms of the transaction mean that $1.03 billion will be transferred in cash directly to Waze and its stockholders; an additional $100 million will be awarded to employees based on performance. These figures are something Facebook can probably not afford to afford. I think that Google is also a better fit for the company given that it has a large presence in Israel and therefore would not require Waze to relocate its R&D to California, as Facebook had wanted.
This deal however is not all sweet for Google. In the last week of June, the US Federal Trade Commission (FTC) confirmed that the acquisition will be investigated to ascertain whether the deal will restrict consumer choice. It follows pressure from consumer groups that the deal should be blocked on antitrust grounds. Consumer Watchdog had raised the concern with the Department of Justice of Google becoming essentially a mapping and data monopoly. The ruling will be made in due course but a block on the deal will be unlikely I feel since Waze and Google will remain as separate units (at least for now). The market share of Google Maps even merged with Waze is also unlikely to be astronomically high.
All in all, both parties have got themselves a pretty good deal. Whatever Google's long term plans with Waze are, there is no doubt that into the near future, Google will add real time traffic technology onto its maps.
*****
- June 5 2013, Xerox buys LearnSomething Inc., expanding into health care.
Xerox, a company that is typically known for its photocopying machines, printers, publishing and other related equipment and consulting services, acquired LearnSomething at the beginning of the month for an undisclosed sum. LearnSomething, based in Florida, is an e-learning service provider of industry information, training and educational programs to food, drug and health care industries. I have not heard of LearnSomething previously and was surprised to find that they supply industry information and educational programs to 110,000 retail pharmacists in the US (equivalent to 85% of US retail pharmacists). The Learner Community e-learning platform is used to deliver regulatory compliance courses for food and drug retailers.
Whilst the terms of the deal weren't disclosed, a few interesting points can still be made.
Xerox in recent years have been working to restructure and re-brand itself as a customer focused services business providing services such as document management, bill processing and IT outsourcing in the backdrop of decreasing sales of its traditional products of copiers and printers. This deal effectively allows Xerox to build on its mark and broaden its services in the healthcare industry following the purchase of TMS Health in 2010.
Given that 500 new over-the counter medications and health/beauty products are introduced every year, and with LearnSomething being a leading provider of educational, training and regulatory services, it seems to me that there will be no shortage of business for Xerox in this area. In turn, this will contribute to an easier re-structuring as Xerox turns away from its traditional business into a more lucrative asset-lite business of customer services.
*****
- June 2013, Billabong troubles rumbles on.
I am no surfer and have never lived near a surfing community but Billabong and other surfing brands like Quiksilver, Rip Curl and O'Neill managed to merge itself into the mass fashion market when I was a kid. Not only were these brands hugely popular, but they were seen as the coolest, trendiest and the most 'it' thing to have. Bus fashions of course fade and go, as do businesses. The whole Billabong trouble is something I've been following fairly closely over the past few month due to my acquaintance with the brand when I was younger.
In developments this month, Billabong is now looking to sell its retail units separately after 2 private equity firms and Billabong did not reach an agreement to buy the company outright. The three units to sell are DaKine Hawaii Inc., RVCA, and West49, and this could be a means of raising enough capital to repay the company's $350 million syndicated debt facility.
Billabong rejected a $903.5 million bid from TPG Capital Management in Feb 2012 but the value of the company has really plummeted: Billabong's shares closed at $0.90 on Jan. 11, when Altamont submitted a $556 million bid. By April, Billabong received a bid of $284 million from Sycamore.
Hindsight is a wonderful thing but Billabong is not a lost cause. I feel that still at the end of the day, Billabong is a nice brand image for surfers and beachwear. What it needs to do is lower prices and appeal to the mass market once again especially for its beachwear and accessories to reverse its revenue situation since management changes and any strategic restructurings have not turned fortunes around so far. Of course, the flip side of this may be that Billabong will lose appeal to surfers as they wish sport more obscure brands to differentiate themselves from mass culture, enforcing their own sub-culture. However, since nothing else is working, and if Billabong is desperate, clever global marketing campaigns to attract the brand once again to non-surfers is the best path to boost revenue.
JH
In developments this month, Billabong is now looking to sell its retail units separately after 2 private equity firms and Billabong did not reach an agreement to buy the company outright. The three units to sell are DaKine Hawaii Inc., RVCA, and West49, and this could be a means of raising enough capital to repay the company's $350 million syndicated debt facility.
Billabong rejected a $903.5 million bid from TPG Capital Management in Feb 2012 but the value of the company has really plummeted: Billabong's shares closed at $0.90 on Jan. 11, when Altamont submitted a $556 million bid. By April, Billabong received a bid of $284 million from Sycamore.
Hindsight is a wonderful thing but Billabong is not a lost cause. I feel that still at the end of the day, Billabong is a nice brand image for surfers and beachwear. What it needs to do is lower prices and appeal to the mass market once again especially for its beachwear and accessories to reverse its revenue situation since management changes and any strategic restructurings have not turned fortunes around so far. Of course, the flip side of this may be that Billabong will lose appeal to surfers as they wish sport more obscure brands to differentiate themselves from mass culture, enforcing their own sub-culture. However, since nothing else is working, and if Billabong is desperate, clever global marketing campaigns to attract the brand once again to non-surfers is the best path to boost revenue.
 |
| Billabong: not so cool for school anymore |
JH
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