Split-Up or Shut-Up

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In a recent interview, investor superstar Marc Andreessen told Bloomberg’s Emily Chang at the Salesforce Dreamforce Conference on Wednesday.  that if a technology company is more than 20 years old, then “they’ll probably benefit from being broken up, and many of them will probably be forced to break up if they don’t do it voluntarily.” He is involved with two big split-ups now (HP and eBay). He cites that “there is the opportunity to do more and better if you’re smaller and more nimble.”

Splitting up means “having smaller, more-independent companies” that are “able to get more aggressive.” This is a unique time in history as generally firms acquire and get bigger. The reason for the reverse in logic, explains Andreessen, is because things are happening so quickly. Smaller firms are more agile. For example, Sony had a premium brand for decades with its Trinitron TVs – but nothing in electronics will ever again have a reign like the CRT television tube did. Technology companies are in a constant state of disruption. The digital PBX was king from the 70s to about 2005 – allowing a firm like Nortel to get big and strong. Then came the disruption, and new rules and the company failed to adapt, and big became a liability.

EMC is under pressure to sell VMware, many believe Microsoft should split between platforms and applications. It will eventually make sense for Amazon to separate its retail and hosting businesses. The list goes on.

Let’s turn our focus to the UC premises industry.

  • ALUE: Just split from parent ALU. UC and networking is now a part of Huaxin. It is still possible/reasonable that UC and networking could be split.
  • Avaya: There’s multiple ways Avaya could split – such as splitting out its network division which doesn’t seem to have much synergy with its UC/Collaboration focus. More likely though it would make sense to split Avaya’s professional services from its products. Avaya has seen significant growth in services over the past several years.
  • Cisco: Already under pressure. RBC Capital Markets Managing Director, Mark Sue, called for Cisco to be split into two separate businesses: Cisco Cloud and Cisco Solutions. “We think splitting Cisco into two, one with a cash-generation focus and the other with a growth focus, could provide a higher target for the shares and also potentially make for a much more nimble organization.”
  • Logitech: Could easily spin out LifeSize.
  • Microsoft: Split operating systems from applications, and spin-out X-Box and Surface.
  • Mitel: Mitel did recently split out its DataNet distribution business. It does have a broad portfolio, but it is largely all UC. However, there may be value to separate by constituency as it is currently selling to distributors, dealers, providers, and enterprises.
  • NEC: In most regions, its telephony/UC business is fairly independent from its other offerings. It would not be unreasonable to split it out, but one of its core strengths is worldwide availability which would need to be protected.
  • Polycom: Should split out its telephony business. It already did spin-out its wireless phone business (Spectralink).
  • ShoreTel: The company spent a good chunk of the last year integrating its cloud and premises divisions. A spin-out seems unlikely. ShoreTel was the young disruptor, and is now attempting to use its smaller size to outmaneuver competitors to the cloud.
  • Unify: Is in fact a split from Siemens. Recently, it further split-off its networking business. There is probably no more reason to become smaller.

 

Dave Michels