Google to Buy Admob for $750 Million

Google is to pay $750 million to buy AdMob, a provider of advertising on mobile phones, the internet search leader announced Monday.

The deal is the third largest ever undertaken by Google and underscores the company's strategy of extending its online advertising dominance to the mobile web, where its Android smartphone operating system is becoming increasingly popular. Google said it expected antitrust regulatory review in the U.S. but not in Europe.

AdMob has a system that serves display ads on mobile phones and its purchase could give the still nascent market a powerful boost, analysts said.

"Google could have built this itself, but this gives them a head start," says mobile analyst Greg Sterling of Sterling Market Intelligence. "It will thrust Google into the forefront of mobile display ads."

"AdMob is a great Silicon Valley story," said Google in a blog posting to announce the deal. "We are looking forward to having them join the Google team and work with us on the future of mobile advertising."

Wipro buys Yardley's byusiness

Bangalore: Wipro has brought 229 year old British brand Yardley's business in select markets such as India, Asia, Australiasia, Middle East and north and west Africa to stretch its personal care portfolio to the premium range.

Wipro Consumer Care and Lighting, the consumer products arm of the software firm, has taken up Yardley business across these areas for $45.5 million (Rs. 215 crore), continuing its takeover spree that included Unza.


"We picked up a lot of debt from Unza's balance sheet when we acquired it. Yardley is a profitable brand and will add to our operating margins which are at 10-13 percent," said Vineet Agrawal, President, Wipro Consumer Care.

Being controlled by British billionaire Mike Jatania, Lornamead had acquired the Yardley brand in September 2005 for 60 million pounds. It will retain the Yardley business in Europe and America. Funded by internal accruals, this deal will enable Wipro straddle different price points and give it greater bargaining power for key accounts in certain markets.

"Yardley is a great fit for Wipro if it wants to go beyond Santoor to include more premium brands. Synergies will improve if Wipro took a bottoms-up approach of gearing its sales force and partners towards this change to premium range," said Anand Ramanathan, FMCG Analyst, KPMG.

Yardley's Lavender talcum-to-soap range is priced around 50 percent higher than the costliest brand in Wipro's existing portfolio, Unza's Enchanteur range. This move will also strategically surge Wipro Consumer Care's foothold in high growth markets such as the Middle East where its overall revenue is projected to double to $30-35 million. The Middle East contributes 70 percent to the acquisitions revenues, with 20 percent coming from India and the remainder from other Asian markets.

Wipro is also in plans to increase the product range under the Yardley brand. "We see certain gaps in Yardley's product range such as body washes and deodorant roll-ons, which we feel could be added to increase relevance with the youth. We are also evaluating the manufacture of Yardley products such as soaps through our factories," said Agarwal.

The company plans to leverage its distribution reach across 50,000 outlets in metros and tier-I cities to grow the brand in India and sees cost efficiencies rising out of merging common suppliers. Wipro Consumer Care has made a series of acquisitions in the past six years.

Wipro arrived on the acquisition stage in 2003 by picking up Hindustan Unilever's glucose drink brand Glucovita. It bought Kerala based ayurvedic brand Chandrika after one year and Delhi based North West Switchgear's switches business in 2006.

Wipro Consumer Care division came into limelight in 2007 with its $246 million purchase of Singapore based personal care firm Unza Holdings, which has a significant presence across South-East Asian markets. This deal will see Wipro Consumer Care's contribution to the parent's top line growing by 50 basis points. In the second quarter, the consumer-care division notched up eight percent of Wipro's overall revenues. Wipro's stock closed at Rs. 598.30 on the Bombay Stock Exchange, a rise of 0.42 percent on Thursday.

Xerox boosts BPO Buys ACS

Xerox boosts BPO offering with ACS buy

A week after Dell announced plans to acquire Perot Systems, another Texan services firm has been snapped up by a large hardware manufacturer. Xerox is paying $6.4 billion for Affiliated Computer Services (ACS), following not only in the footsteps of Dell, but HP and IBM too.

The purchase of ACS will more than triple Xerox's services revenues to an estimated $10 billion in 2010, from $3.5 billion in 2008. The combined operation, to be known as 'ACS, a Xerox Company' and led by ACS CEO Lynn Blodgett, will comfortably rank as one of the 20 largest global IT services providers, ahead of the newly expanded Dell services business, which should generate yearly sales of around $8.5 billion.

Xerox and Dell now join other hardware vendors such as IBM, HP, Fujitsu and Unisys in the list of the top 20 biggest global IT services providers. This further underlines the increased investment in services by major hardware manufacturers.

ACS finally gets the takeover deal it wanted
ACS has been flirting with potential private equity acquirers for several years now. Most recently, in 2007 founder and chairman Darwin Deason, backed by investment group Cerberus Capital Management, tabled a series of offers culminating in a bid of $62 per share. However, the proposal met shareholder opposition and did not pass.

Almost two years on, and in a very different economic environment, Xerox has succeeded in pushing its bid through and it is not difficult to see why the deal is attractive to both sides. As with Dell, IBM and HP, Xerox is looking to keep pace with the converging IT market. Simply put, hardware vendors with services arms are able to cross-sell both hardware and services, as well as diversifying their business away from hardware refresh cycles.

For ACS, which generates over 90% of its revenues from the US, Xerox intends to help it expand globally - something it did not achieve alone, despite several years of trying. ACS said in 2006 that it was planning a major expansion in Europe, but the expected large-scale acquisitions failed to materialise. Instead, the company preferred to make a number of small purchases, including UK-based infrastructure services firm Anix for $50 million and Germany's SDS Business Services for $67 million. It is therefore not surprising that Xerox intends to use its brand name and existing client relationships to grow ACS's business in Europe, Asia-Pacific and South America.

More a BPO than an IT move
What makes ACS really attractive to Xerox is its business process outsourcing (BPO) capability. Of all the global IT services vendors mentioned above, ACS generates a higher proportion of its revenues from BPO (79%) than any other. It also has expertise both across horizontal functions (such as finance and accounting outsourcing) and in vertical-specific areas such as healthcare payer and insurance transactions.

The ability to further automate ACS's services using Xerox document management technology has been singled out as a major advantage for the combined company. This should result in lower cost of service and potentially the introduction of new types of BPO service where the combined company can remove or lessen manual processing.

However, the challenge of internationalising the combined business should not be underestimated. Recognisable as the Xerox name may be, it is not automatically associated with the delivery of business-critical services, especially outside North America.

IT BPO Mergers and Acquisitions go Slow

The pace of IT and BPO companies merging is slowing down. The reason for this is simple, at one point in time during December to February the morale and business confidence was its lowest and valuations had come down to multi year lows. However since february the markets have now again reverted and regained the lost ground.

This has resulted in valuations going up and hence mergers and acquisitions at these levels are risky.

Bangalore: In 2009, it seems that IT and BPO companies have stayed away from blockbuster merger and acquisition (M&A) deals. According to the data tracked by Grant Thornton, an accounting and consulting firm; against the total deals value of $1.3 billion in January-July 2008, the M&A space grossed only $616 million this year.

While the Tech Mahindra-Satyam deal bolstered the domestic numbers, the total value of cross-border deals (outbound and inbound combined) fell 83 percent to $156.5 million during January-July this year. The cross-border deal volume at 13 deals was a fraction of last year's level (47 deals).

A total of 16 PE transactions in the IT and BPO space grossed $108.6 million in January-July 2009, compared with 39 deals that yielded $258.3 million in the corresponding period last year. S Mahalingam, CFO and Executive Director, Tata Consultancy Services said, "The subdued level of M&A activity underlined the industry's thinking that given the tough environment, the focus should be on driving the day-to-day business."

According to Nasscom, India's IT and BPO industry is expected to clock an export revenue growth rate of 4-7 percent in the financial year (FY) 2010, substantially lower than the 16.3 percent recorded in FY 2009. Harish H V, Partner - Grant Thornton India said, "The entire mood in the industry had been weak due to the slowdown in key export markets. M&A was not on the top of the mind for most players. Although we expect the activity to pick-up in the coming months, the full-year numbers will still be lower than last year."