Big names in technology swooped into Orange County in 2006 and early 2007, spending an estimated $2.4 billion on acquisitions.
It wasn’t the most active year for the tech sector here. But the deals that did take place were notable for their prices and buyers.
The buying took away a sizable public company, a big privately held spinoff and two promising startups. It still left plenty of room for more deals this year, with several possible candidates,including some long speculated as takeover targets,still standing.
A look at last year’s tech deals:
n In the largest deal for the tech sector and the second-largest for OC in 2006, IBM Corp. bought Costa Mesa-based business software maker FileNet Corp. for $1.5 billion in October.
FileNet, one of the county’s oldest software makers, has kept its name and much of its operations as part of IBM. Big Blue is making FileNet’s Costa Mesa campus into the headquarters for a unit that produces enterprise content management software, which is used to manage various types of data.
n Acquicor Technology Inc. paid $260 million for Newport Beach-based Jazz Semiconductor Inc. in a deal that closed early this year.
Jazz, a chip plant operator spun off from Newport Beach’s Conexant Systems Inc. in 2002, had been seeking to go public for years. It now trades publicly as part of Acquicor, a Newport Beach-based blank check company staffed by Gil Amelio and other former Apple Inc. executives. Acquicor now goes by Jazz Technologies.
n Irvine’s VitalStream Holdings Inc., a maker of software for online video and audio, was bought in February for $219 million by Atlanta-based Internap Network Services Corp.
Internap helps companies directly connect to the Internet. VitalStream uses software to deliver audio and video over the Internet.
n Irvine-based Avamar Technologies Inc. was sold to EMC Corp. for $165 million in November. Avamar was one of the county’s best funded startups with more than $50 million raised.
Avamar makes data storage software and devices and was part of EMC’s bid to boost the software side of its business.
n In December, Laguna Niguel-based Bitfone Corp. was bought by Hewlett-Packard Co. for an undisclosed sum. (The Business Journal estimates the deal was worth at least $100 million but doesn’t include it on the list since the actual price hasn’t been determined.)
Bitfone makes software for updating cellular phones via wireless networks and had raised $70 million in venture funding.
The county still has a number of midsize and even big-name companies that could be seen as possible acquisition candidates.
Irvine’s Gateway Inc. is the subject of renewed takeover speculation.
The struggling computer maker could be attractive to Asian computer makers looking to gain in the U.S. market, the thinking goes. At the top of the list: Taiwan’s Acer Inc. Buying Gateway would catapult Acer from virtually nothing here to the country’s No. 3 computer maker. China’s Lenovo Group Ltd., which bought IBM’s PC business in 2005, is another possible suitor.
Like Gateway, Lake Forest-based Western Digital Corp. gets its share of takeover rumors.
The company is No. 2 in disk drives to Scotts Valley-based Seagate Technology, which bought Maxtor Inc. early last year. Regulatory hurdles make an acquisition of Western Digital by Seagate unlikely. More plausible are Asian suitors. For Hitachi Ltd., Toshiba Corp. or Samsung Group, Western Digital would be a big boost in their U.S. businesses.
Aliso Viejo-based Quest Software Inc. is a perennial on the speculation short list. The maker of software to monitor the performance of databases and other programs first has to sort through its options backdating issues.
Quest hasn’t been able to file financials because of its internal options probe and has received obligatory delisting threats from Nasdaq.
As a midsize player in an industry dominated by big companies, Quest often has been cited as a possible target of Oracle Corp., Microsoft Corp., IBM or HP. Private equity firms always are a possibility. A sale would have to come down to Chief Executive Vinny Smith, who owns about 40% of the company.
Epicor Software Corp. of Irvine is in a similar boat. The company sells accounting and other business software to midsize companies. Big software makers looking for growth from smaller business customers could take a liking to Epicor.
Others to keep an eye on:
n Multi-Fineline Electronix Inc.: When you sue your corporate parent to try and back out of a deal to acquire a sibling, chances are your parent isn’t going to stand in your way of leaving the family (see story, page 3). Could a private equity investor adopt the Anaheim maker of circuit boards? Could parent WBL Corp. sell off its majority stake in Multi-Fineline?
n Powerwave Technologies Inc.: The maker of wireless network gear is under a tidal wave of bad news, including slumping financials and investor lawsuits. When the storm clears, the Santa Ana company would be attractive to someone wanting to expand in wireless network gear.
n Universal Electronics Inc.: The Cypress company makes remote controls for just about every brand of entertainment component known to man. But as everyone knows, there’s always a fight over who controls the remote. Someone may want the company, and the licensing rights it has, all to themselves.
As for startups, a handful come to mind.
One is Foothill Ranch-based Aristos Logic Corp., a maker of controllers that’s raised nearly $100 million in venture capital.
Another is Irvine-based business software maker LogicalApps Inc., which sells software that helps companies automate financial controls and compliance with the Sarbanes-Oxley accounting reform act of 2002.
LogicalApps solves problems for businesses,always an appeal for possible suitors.
Lastly, there’s Lake Forest’s Newport Media Inc., a maker of chips for watching TV on wireless phones and other devices. The company faces a challenging market in mobile TV, which is big in Asia but lukewarm at best here.
Now Verizon Communications Inc. is pushing the service. If mobile TV takes off, Newport Media could prove attractive to Irvine’s Broadcom Corp. or another chipmaker.
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Gateway Denies Acer Takeover Talks
Irvine-based computer maker Gateway Inc. last week denied it was in talks about a possible sale to Taiwan’s Acer Inc.
The company took the extraordinary step of commenting on the rumor, trying to put to rest speculation that a deal is in the offing.
The comment came a day after Gateway shares rose nearly 7% on the takeover speculation. Acer has declined to comment.
An Acer-Gateway deal long has been considered a possibility as Gateway struggles to rebuild and Acer seeks a stronghold in the U.S. The buzz intensified with recent comments from Acer’s Chief Executive J.T. Wang that the company is “hoping to make an acquisition this year.” The Associated Press reported sources said Wang indicated he was speaking of Gateway.
Gateway has cut payroll and refocused its sales effort on the consumer market in the past six months under new Chief Executive Ed Coleman. The company also added two directors to avoid a proxy battle with Firebrand Partners LLC, which owns 10.7% in the company. Gateway also rebuffed a buyout offer from a major shareholder late last year.
Gateway swung to a profit in the fourth quarter, but that was attributed to a tax benefit. Net income for the quarter was $8.8 million, versus a year-ago loss of $20.9 million. Revenue fell 9% to $1.02 billion, falling short of Wall Street expectations.
Coleman has said in talks with industry watchers that Gateway still enjoys great brand recognition. He has pinned turnaround efforts on focusing the company on the consumer market.
Gateway had tried to compete on the commercial side, but failed to make any significant inroads against Hewlett-Packard Co. and Dell Inc.
,Dan Anderson
