Samsung’s $63 Billion Cash Pile Augurs Tech Takeovers: Real M&A
2015-01-25 15:00:01.2 GMT
(For a Real M&A column news alert: SALT REALMNA <GO>.)
By Jungah Lee and Angus Whitley
(Bloomberg) -- Whether or not Samsung Electronics Co. has
BlackBerry Ltd. in its sights, it should spend some of its $63
billion of cash on takeovers.
Samsung, which has an alliance with BlackBerry, this month
denied reports it proposed buying the Canadian smartphone maker
for as much as $7.5 billion. Even so, a takeover would give
Samsung the software to help its products communicate, according
to Current Analysis Inc.
The $190 billion South Korean conglomerate makes dozens of
consumer goods, from phones and televisions to vacuum cleaners
and ovens. What it needs is technology to link all the devices
together online in the wireless homes of the future. Other
potential targets include Atmel Corp. and Freescale
Semiconductor Ltd., whose chips help devices talk to each other,
said CM Research Ltd.
“Samsung is a hardware company caught up in a software
revolution,” said Cyrus Mewawalla, managing director at London-
based CM Research. “So it needs to make acquisitions.”
The goal is to profit from what’s known as the Internet of
Things, a world where everyday items, from toasters and washing
machines to phones and printers, are sewn together online and
controlled by devices. The market for the Internet of Things
could reach $7.1 trillion by 2020, research firm IDC has said.
“There are many areas in Internet of Things,” from sensor
technology to components, Samsung said in an e-mailed statement.
“Samsung regards M&A as one of our key business strategies, in
conjunction with organic growth, and we continue to remain open
to partnership and acquisition opportunities.”
Not Enough
The Suwon-based company in August bought SmartThings, a
startup that makes mobile applications to remotely control
household goods. And the previous year, Samsung bought Novaled
AG, a German maker of material to light up a gadget’s screen,
and MOVL, which has developed a service that allows users to
share content between devices such as phones and TVs.
Those deals don’t go far enough, said Neil Shah, research
director for devices and ecosystems at Counterpoint Research.
“Samsung has the vision of how the connected future will
be, but still lacks the expertise and capabilities to tie all
the assets together,” Shah, who is based in Mumbai, said in an
e-mail.
Competitive Pressure
Samsung said in November 2013 it would be more aggressive
in pursuing targets after spending only $1 billion on takeovers
in three years. The earnings power from its Galaxy smartphone
lineup is fading and Apple Inc. and Xiaomi Corp. are gaining
ground. Samsung’s own Tizen software platform has struggled to
gain traction.
“In the near term, it’s hard to see the pressure coming
off them from Xiaomi and all the others,” said Dan Baker, an
analyst at Morningstar Inc. in Hong Kong. “Samsung at the
moment doesn’t really have a software advantage.”
BlackBerry could “potentially be a great acquisition,”
Shah at Counterpoint Research said. BlackBerry has messaging
software that could be rolled out to connect a chain of Samsung
products, and a software program that manages different devices
at once. BlackBerry’s QNX automotive software, which enables
drivers to make hands-free calls, sports three-dimensional
navigation and 3-D gaming for rear seats, is also a draw, he
said.
Samsung co-Chief Executive Officer Shin Jong Kyun said this
month he wanted to develop the two companies’ alliance, rather
than pursue an outright purchase of BlackBerry. Both denied a
Reuters report that Samsung had made a takeover offer.
Chip Push
While Samsung is the world’s second-largest semiconductor
maker, it still could make acquisitions in this area to boost
its capabilities.
Last week, people with knowledge of the matter said Samsung
will use its own chips in the next Galaxy S smartphone and drop
a Qualcomm Inc. unit. That’s a sign Samsung wants more control
of the processors in its products, Morningstar’s Baker said. San
Jose, California-based Atmel, which has a market value of $3.5
billion, and the $7.9 billion Freescale, are both feasible
chipmaking targets for Samsung, he said.
Atmel is among chipmakers focusing on the Internet of
Things, developing technologies that help machines talk to each
other and building wireless-radio capabilities. Atmel’s chips
power washing machines and cookers as well as car doors and
windows. Freescale’s semiconductors are used in everything from
space hardware to household goods.
A representative for Atmel declined to comment on whether
it’s been approached by buyers or has explored a sale. A
representative for Austin, Texas-based Freescale didn’t respond
to a phone call or e-mail seeking comment.
European Targets
Other targets that Samsung might consider: Opera Software
ASA, a Norwegian maker of Internet browsers for phones, tablets
and computers, which has a market value of $1.9 billion; and
closely held AlertMe Ltd., a U.K. company that has developed
technology to control dozens of devices from different
manufacturers on a single network, according to Mewawalla at CM
Research.
Sensor makers would also make sense as targets, said Park
Hyun Je, a creative planner at a research and development center
under the South Korea’s science ministry.
Still Early
For companies attempting to profit from the Internet of
Things, it’s tough to pick the right targets because the concept
is in its infancy, said Avi Greengart, research director for
consumer devices at Sterling, Virginia-based Current Analysis.
“It’s not clear which layer of the technology stack will
provide the most value and control,” Greengart said in an e-
mail. “Any investment, whether homegrown or via acquisition,
may lead to dead ends.”
Samsung is willing to spend. The company this month said it
will invest more than $100 million in developers of smart
technology for homes and devices. Samsung Ventures, a venture
capital firm, led a $20 million funding round for Israel’s
EarlySense Ltd., the companies said in a Jan. 20 statement.
All the same, takeovers might be the fastest way for
Samsung to prepare for the explosion of connected devices that’s
expected this decade.
When it comes to software, Samsung “looks far behind its
competitors,” said Mewawalla at CM Research.
For Related News and Information:
Samsung Hunts Next Hit With Internet Push as Phone Profits Fade
Samsung Takes Google Challenger to TVs as Smartphone Flops
Top deal stories: DTOP <GO>
Real M&A columns: NI REALMNA <GO>
Top Stories: TOP<GO>
--With assistance from Tara Lachapelle in New York.
To contact the reporters on this story:
Jungah Lee in Seoul at +82-2-3702-1642 or
jlee1361@bloomberg.net;
Angus Whitley in Sydney at +61-2-9777-8643 or
awhitley1@bloomberg.net
To contact the editors responsible for this story:
Michael Tighe at +852-2977-2109 or
mtighe4@bloomberg.net;
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Beth Williams, Elizabeth Wollman
2015-01-25 15:00:01.2 GMT
(For a Real M&A column news alert: SALT REALMNA <GO>.)
By Jungah Lee and Angus Whitley
(Bloomberg) -- Whether or not Samsung Electronics Co. has
BlackBerry Ltd. in its sights, it should spend some of its $63
billion of cash on takeovers.
Samsung, which has an alliance with BlackBerry, this month
denied reports it proposed buying the Canadian smartphone maker
for as much as $7.5 billion. Even so, a takeover would give
Samsung the software to help its products communicate, according
to Current Analysis Inc.
The $190 billion South Korean conglomerate makes dozens of
consumer goods, from phones and televisions to vacuum cleaners
and ovens. What it needs is technology to link all the devices
together online in the wireless homes of the future. Other
potential targets include Atmel Corp. and Freescale
Semiconductor Ltd., whose chips help devices talk to each other,
said CM Research Ltd.
“Samsung is a hardware company caught up in a software
revolution,” said Cyrus Mewawalla, managing director at London-
based CM Research. “So it needs to make acquisitions.”
The goal is to profit from what’s known as the Internet of
Things, a world where everyday items, from toasters and washing
machines to phones and printers, are sewn together online and
controlled by devices. The market for the Internet of Things
could reach $7.1 trillion by 2020, research firm IDC has said.
“There are many areas in Internet of Things,” from sensor
technology to components, Samsung said in an e-mailed statement.
“Samsung regards M&A as one of our key business strategies, in
conjunction with organic growth, and we continue to remain open
to partnership and acquisition opportunities.”
Not Enough
The Suwon-based company in August bought SmartThings, a
startup that makes mobile applications to remotely control
household goods. And the previous year, Samsung bought Novaled
AG, a German maker of material to light up a gadget’s screen,
and MOVL, which has developed a service that allows users to
share content between devices such as phones and TVs.
Those deals don’t go far enough, said Neil Shah, research
director for devices and ecosystems at Counterpoint Research.
“Samsung has the vision of how the connected future will
be, but still lacks the expertise and capabilities to tie all
the assets together,” Shah, who is based in Mumbai, said in an
e-mail.
Competitive Pressure
Samsung said in November 2013 it would be more aggressive
in pursuing targets after spending only $1 billion on takeovers
in three years. The earnings power from its Galaxy smartphone
lineup is fading and Apple Inc. and Xiaomi Corp. are gaining
ground. Samsung’s own Tizen software platform has struggled to
gain traction.
“In the near term, it’s hard to see the pressure coming
off them from Xiaomi and all the others,” said Dan Baker, an
analyst at Morningstar Inc. in Hong Kong. “Samsung at the
moment doesn’t really have a software advantage.”
BlackBerry could “potentially be a great acquisition,”
Shah at Counterpoint Research said. BlackBerry has messaging
software that could be rolled out to connect a chain of Samsung
products, and a software program that manages different devices
at once. BlackBerry’s QNX automotive software, which enables
drivers to make hands-free calls, sports three-dimensional
navigation and 3-D gaming for rear seats, is also a draw, he
said.
Samsung co-Chief Executive Officer Shin Jong Kyun said this
month he wanted to develop the two companies’ alliance, rather
than pursue an outright purchase of BlackBerry. Both denied a
Reuters report that Samsung had made a takeover offer.
Chip Push
While Samsung is the world’s second-largest semiconductor
maker, it still could make acquisitions in this area to boost
its capabilities.
Last week, people with knowledge of the matter said Samsung
will use its own chips in the next Galaxy S smartphone and drop
a Qualcomm Inc. unit. That’s a sign Samsung wants more control
of the processors in its products, Morningstar’s Baker said. San
Jose, California-based Atmel, which has a market value of $3.5
billion, and the $7.9 billion Freescale, are both feasible
chipmaking targets for Samsung, he said.
Atmel is among chipmakers focusing on the Internet of
Things, developing technologies that help machines talk to each
other and building wireless-radio capabilities. Atmel’s chips
power washing machines and cookers as well as car doors and
windows. Freescale’s semiconductors are used in everything from
space hardware to household goods.
A representative for Atmel declined to comment on whether
it’s been approached by buyers or has explored a sale. A
representative for Austin, Texas-based Freescale didn’t respond
to a phone call or e-mail seeking comment.
European Targets
Other targets that Samsung might consider: Opera Software
ASA, a Norwegian maker of Internet browsers for phones, tablets
and computers, which has a market value of $1.9 billion; and
closely held AlertMe Ltd., a U.K. company that has developed
technology to control dozens of devices from different
manufacturers on a single network, according to Mewawalla at CM
Research.
Sensor makers would also make sense as targets, said Park
Hyun Je, a creative planner at a research and development center
under the South Korea’s science ministry.
Still Early
For companies attempting to profit from the Internet of
Things, it’s tough to pick the right targets because the concept
is in its infancy, said Avi Greengart, research director for
consumer devices at Sterling, Virginia-based Current Analysis.
“It’s not clear which layer of the technology stack will
provide the most value and control,” Greengart said in an e-
mail. “Any investment, whether homegrown or via acquisition,
may lead to dead ends.”
Samsung is willing to spend. The company this month said it
will invest more than $100 million in developers of smart
technology for homes and devices. Samsung Ventures, a venture
capital firm, led a $20 million funding round for Israel’s
EarlySense Ltd., the companies said in a Jan. 20 statement.
All the same, takeovers might be the fastest way for
Samsung to prepare for the explosion of connected devices that’s
expected this decade.
When it comes to software, Samsung “looks far behind its
competitors,” said Mewawalla at CM Research.
For Related News and Information:
Samsung Hunts Next Hit With Internet Push as Phone Profits Fade
Samsung Takes Google Challenger to TVs as Smartphone Flops
Top deal stories: DTOP <GO>
Real M&A columns: NI REALMNA <GO>
Top Stories: TOP<GO>
--With assistance from Tara Lachapelle in New York.
To contact the reporters on this story:
Jungah Lee in Seoul at +82-2-3702-1642 or
jlee1361@bloomberg.net;
Angus Whitley in Sydney at +61-2-9777-8643 or
awhitley1@bloomberg.net
To contact the editors responsible for this story:
Michael Tighe at +852-2977-2109 or
mtighe4@bloomberg.net;
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Beth Williams, Elizabeth Wollman