By Noel Randewich and Jim Finkle

SAN FRANCISCO |
Wed May 23, 2012 4:10am EDT

SAN FRANCISCO (Reuters) – Top European software company SAP AG plans to buy Ariba Inc in a deal valuing the business and commerce network company at $4.3 billion, its latest maneuver against Oracle in the fast-growing Internet-based computing market.

SAP is taking aim at Oracle, the world’s No. 2 maker of business management software, as they vie with Salesforce.com Inc in the multibillion dollar cloud-computing services market, one of the industry’s hottest area of growth.

Shares in Ariba, which were halted briefly, leapt 20 percent to SAP’s offer price of about $45 per share.

“This deal puts them more on the radar screen and gives them another big customer base they can sell additional services into. These are not inexpensive moves but it signals they are really tilting more toward the cloud,” said Evercore analyst Kirk Materne.

SAP’s announcement comes just weeks before Oracle CEO Larry Ellison is due to announce the Silicon Valley company’s latest cloud software strategy, on June 6.

The $45-per-share offer for Ariba, a darling of the first dotcom boom that has since reinvented itself as a major networking and online commerce software developer, values Ariba at 6.9 times expected 2013 revenue, according to Roth Capital Partners.

Salesforce.com trades around 5.5 times expected revenue.

The purchase of Sunnyvale, California-based Ariba would be the latest in a string of acquisitions by German technology company SAP to help fuel its revenue growth and expand its cloud computing business.

SAP said it expected the deal, already approved by Ariba’s board, to close in the third quarter.

But Cross Research analyst Richard Williams said that since many of Ariba’s customers use Oracle services, there is good reason — and precedence — to expect the U.S.-based Oracle to make a rival bid.

In 2005, Oracle snatched retail software maker Retek away from SAP after a bidding war that reached $630 million.

“Strategically it’s a valuable asset and would disadvantage Oracle if SAP were to close the deal, so I can see a case for why Oracle would feel the need to enter into the bidding to protect its own potential growth opportunities,” Williams said.

SHARES HALTED

Cloud computing refers to providing software, storage, computing power and other services to customers from remote data centers over the Web.

Oracle and SAP are locking horns as both transform themselves into major players in the cloud and reduce their reliance on traditional business software. SAP’s purchase of Web-based software company SuccessFactors Inc, announced late last year, was seen as accelerating their running battle.

In February, Oracle increased its bet on cloud computing by agreeing to purchase Taleo Corp, a maker of Web-based software for recruiting employees, for about $1.9 billion.

SAP’s deal puts Ariba’s enterprise value at about $4.3 billion. Enterprise value is market capitalization plus debt and other considerations.

Demand for cloud-based software is rising rapidly because the approach allows companies to start using new programs faster and at lower cost than traditional products that are installed at a customer’s own data center.

SAP intends to integrate Ariba into Hana, a business intelligence tool to help companies analyze large quantities of data quickly. Hana came to market last year and generated 160 million euros in sales through the end of 2011, surpassing SAP’s own expectations of 100 million euros.

“We are looking forward to optimizing Ariba so it can be used in real-time. This is a new category of the cloud. We want to accelerate the platform for collaboration between companies,” SAP co-chief executive Jim Hagemann Snabe said on a conference call.

SAP said its transaction would be funded from its free cash and a 2.4 billion euro ($3.06 billion) term loan facility.

The European company also said it would consolidate its cloud-based supplier assets under Ariba, which would continue to operate as an independent business.

Ariba shares closed up 19.2 percent to $44.87 on Nasdaq on Tuesday, suggesting investors expect the deal to be completed around that price. ($1 = 0.7838 euros)

(Additional reporting by Jim Finkle in Boston and Sayantani Ghosh in Bangalore; Editing by Viraj Nair, Carol Bishopric, David Gregorio, Phil Berlowitz and Bob Burgdorfer)

Article source: http://feeds.reuters.com/~r/reuters/technologyNews/~3/IKwgF8KNyj0/us-ariba-sap-idUSBRE84L14H20120523

By Poornima Gupta

SAN FRANCISCO |
Tue May 22, 2012 6:34pm EDT

SAN FRANCISCO (Reuters) – Dell Inc forecast disappointing second-quarter revenue as U.S. and European corporate tech spending weakens and consumer personal computer sales continue to shrink, hammering its shares.

Shares in the company, which like rival Hewlett-Packard Co is losing market share to mobile devices such as Apple Inc’s iPad, dived more than 11 percent in after hours trade.

The world’s No. 3 PC maker forecast a 2 to 4 percent revenue gain this fiscal quarter, to $14.7 billion to $15 billion, well short of the $15.4 billion Wall Street had been expecting.

“Clearly we are seeing a bit more challenging demand environment,” Dell Chief Financial Officer Brian Gladden said in an interview. “Europe, in general, was down for us.”

Demand from U.S. federal businesses appears to be improving slightly, he noted. “We are seeing a pretty good pipeline there.”

Dell’s quarterly revenue fell more than analysts had expected, hurt by weak sales to consumers, large enterprises and government units. PC makers have struggled with slowing demand as mobile devices such as the iPad erode market share.

Brian Marshall, an analyst with ISI Group, said the “real poor results” shows that it will take Dell more time to transform itself from a PC company to a one-stop shop for all the information technology needs of corporations.

“It clearly is disappointing,” Shaw Wu, an analyst with Sterne Agee, said. “The expectations heading into the quarter were not even that high.”

CONSUMER SALES SLOW DOWN

Dell’s sales to consumers took a big hit, with consumer revenue slipping 12 percent to $3 billion. Sales to large corporations declined 3 percent to $4.4 billion.

Dell said revenue in its fiscal first quarter declined 4 percent to $14.4 billion, below the average analyst estimate of $14.9 billion according to Thomson Reuters I/B/E/S.

Excluding one-time items, the company earned 43 cents, less than the average Wall Street estimate of 46 cents.

Net income fell to $635 million, or 36 cents a share, from $945 million, or 49 cents a share, a year earlier.

Gross margins for the quarter came in at 21.3 percent.

“April was not what we expected,” Gladden told analysts on a conference call, but he added that the “pipelines look pretty good.”

Dell’s shares traded at $13.20 after hours, down from a $15.08 close on Nasdaq.

Dell’s poor showing comes a day before larger rival HP reports its quarterly earnings. Shares in the No. 1 PC maker, which sources say plans to lay off more than 25,000 employees globally as it tries to revive its business, edged down 2.5 percent to $21.24 from a close of $21.78 on the New York Stock Exchange.

HP is merging its PC and printing divisions to shore up margins in the personal computing business.

(Reporting By Poornima Gupta; Editing by Richard Chang)

Article source: http://feeds.reuters.com/~r/reuters/technologyNews/~3/PgYLQxx0Qng/us-dell-idUSBRE84L17P20120522

By Melanie Lee

SHANGHAI |
Tue May 22, 2012 5:59am EDT

SHANGHAI (Reuters) – China’s Alibaba Group could command a Facebook-rivalling valuation of $100 billion when it comes to list its shares, possibly by 2015 – but its more immediate challenge is to hang on to top spot in the country’s $36 billion e-commerce market.

Founded and led by Internet entrepreneur Jack Ma, Alibaba faces increasingly tough competition in its e-commerce stronghold from well-funded rivals 360buy, which is backed by Digital Sky Technologies, Dangdang Inc and Amazon.com Inc. Tencent Holdings, China’s leading online games and social networking firm, has also said it will build up its e-commerce business by creating a separate unit.

“All the big Internet players have gotten into each other’s spaces with this idea that you can create a hermetically-sealed world where users never have to leave your platform,” said Mark Natkin, managing director of tech consultancy Marbridge Consulting.

Tencent’s huge user base – it has 575 million active users on its Qzone social site, which is linked to the popular QQ instant messaging application – and record of expanding successfully into new ventures could challenge Alibaba, which needs to maintain its high growth rate for a successful future listing. Alibaba Group revenue grew at a compound annual rate of 72 percent in 2008-2010.

“Competition is going to get more intense with Tencent entering the market,” said JPMorgan analyst Dick Wei.

CORE FOCUS

This week, Alibaba ended more than two years of often fractious negotiations with Yahoo Inc to buy back much of a stake held by the U.S. web giant and, crucially, reduce the voting power of foreign stakeholders including Yahoo and Japan’s Softbank Corp – allowing Ma to focus on growing his business.

“With the Yahoo share disposal and the plans laid out for it, Alibaba’s management team can focus more on the core business itself,” said JPMorgan’s Wei.

As part of the deal with Yahoo, incentives for Alibaba to list its shares end by December 2015. The company has said there is no timetable for a listing. Alibaba is planning to take its Hong Kong-listed Alibaba.com unit private.

Bankers said Alibaba’s strong earnings growth – EBITDA is close to $1 billion – values the group at $30-$35 billion and is likely to at least treble in the next 3-4 years. By contrast, Baidu Inc, China’s Google equivalent, is currently valued at $42 billion.

UNDER FIRE

The challenge to Alibaba’s market leadership is likely to be in the mid- to long-term, but will be no less intense, and could be costly.

Ma said last year that Alibaba, which doesn’t currently own delivery infrastructure, will invest up to $4.5 billion to ramp up its logistics.

Its Taobao Marketplace, which dominates China’s vast consumer-to-consumer e-commerce market, similar to eBay, has seen its market share slip to around 70 percent from 80 percent in 2008, according to data from Analysys International. Its Taobao Mall has about 50 percent share in the business-to-consumer market.

360buy, China’s largest online retailer, has said it wouldn’t consider a public listing before next year, but a cash infusion would give it a boost in the e-commerce space where spending on marketing is high and brutal price wars are common.

Taobao, Alibaba’s crown jewel and virtual cash machine, accounted for almost two-thirds of $2.8 billion group revenue in 2011. But it has come under fire over fake items sold on its platform, and was last year placed on the United States Trade Representative’s (USTR) notorious markets blacklist for offering a wide range of goods that infringed copyrights.

“They need to go public as a group, but they also need to separate the asset that is having questionable intellectual property issues,” said Eric Wen of Mirae Asset Securities in Hong Kong.

“Taobao inherently has many issues, such as people selling fake goods,” said a banking source, who declined to be named due to the sensitivity of the matter. “This is something Jack Ma has to clean up before the group lists.”

Alibaba has petitioned the USTR over its blacklisting, stressing its efforts to work with intellectual property rights holders to combat piracy.

Last July, Chinese police arrested 36 people in connection with operating fraud on Alibaba.com, prompting an internal memo from Ma and top executive resignations.

(Additional reporting by Prakash Chakravarti, Stephen Aldred and Lee Chyen Yee in HONG KONG; Editing by Kazunori Takada and Ian Geoghegan)

Article source: http://feeds.reuters.com/~r/reuters/technologyNews/~3/G7KZ7LOzHbw/net-us-alibaba-challenges-idUSBRE84L0FS20120522

By Alistair Barr

Tue May 22, 2012 3:26am EDT

(Reuters) – In the run-up to Facebook’s $16 billion IPO, Morgan Stanley, the lead underwriter on the deal, unexpectedly delivered some negative news to major clients: The bank’s consumer Internet analyst, Scott Devitt, was reducing his revenue forecasts for the company.

The sudden caution very close to the huge initial public offering, and while an investor roadshow was underway, was a big shock to some, said two investors who were advised of the revised forecast.

They say it may have contributed to the weak performance of Facebook shares, which sank on Monday – their second day of trading – to end 10 percent below the IPO price. The $38 per share IPO price valued Facebook at $104 billion.

The change in Morgan Stanley’s estimates came on the heels of Facebook’s filing of an amended prospectus with the U.S. Securities and Exchange Commission (SEC), in which the company expressed caution about revenue growth due to a rapid shift by users to mobile devices. Mobile advertising to date is less lucrative than advertising on a desktop.

“This was done during the roadshow – I’ve never seen that before in 10 years,” said a source at a mutual fund firm who was among those called by Morgan Stanley.

JPMorgan Chase and Goldman Sachs, which were also major underwriters on the IPO but had lesser roles than Morgan Stanley, also revised their estimates in response to Facebook’s May 9 SEC filing, according to sources familiar with the situation.

Morgan Stanley declined to comment and Devitt did not return a phone message seeking comment. JPMorgan and Goldman both declined to comment.

Typically, the underwriter of an IPO wants to paint as positive a picture as possible for prospective investors. Investment bank analysts, on the other hand, are required to operate independently of the bankers and salesmen who are marketing stocks – that was stipulated in a settlement by major banks with regulators following a scandal over tainted stock research during the dotcom boom.

The people familiar with the revised Morgan Stanley projections said Devitt cut his revenue estimate for the current second quarter significantly, and also cut his full-year 2012 revenue forecast. Devitt’s precise estimates could not be immediately verified.

“That deceleration freaked a lot of people out,” said one of the investors.

Scott Sweet, senior managing partner at the research firm IPO Boutique, said he was also aware of the reduced estimates.

“They definitely lowered their numbers and there was some concern about that,” he said. “My biggest hedge fund client told me they lowered their numbers right around mid-roadshow.”

That client, he said, still bought the issue but “flipped his IPO allocation and went short on the first day.”

“VERY UNUSUAL”

Sweet said analysts at firms that are not underwriting IPOs often change forecasts at such times. However, he said it is unusual for analysts at lead underwriters to make such changes so close to the IPO.

“That would be very, very unusual for a book runner to do that,” he said.

The lower revenue projection came shortly before the IPO was priced at $38 a share, the high end of an already upwardly revised projected range of $34-$38, and before Facebook increased the number of shares being sold by 25 percent.

The much-anticipated IPO has performed far below expectations, with the shares barely staying above the $38 offer price on their Friday debut and then plunging on Monday.

Companies do not make their own financial forecasts prior to an IPO, and underwriters are generally barred from issuing recommendations on the stock until 40 days after it begins trading. Analysts often rely on guidance from the company in building their forecasts, but companies doing IPOs are not permitted to give out material information that is not available to all investors.

Institutions and major clients generally enjoy quick access to investment bank research, while retail clients in many cases only get it later. It is unclear whether Morgan Stanley only told its top clients about the revised view or spread the word more broadly. The firm declined to comment when asked who was told about the research.

“It’s very rare to cut forecasts in the middle of the IPO process,” said an official with a hedge fund firm who received a call from Morgan Stanley about the revision.

(Editing by Jonathan Weber, Martin Howell and Ian Geoghegan)

Article source: http://feeds.reuters.com/~r/reuters/technologyNews/~3/ZEQoBd3Tmmc/us-facebook-forecasts-idUSBRE84L06920120522

By Natasha Baker

TORONTO |
Mon May 21, 2012 5:01am EDT

TORONTO (Reuters) – Imagine taking a snapshot of a group of friends and having your smartphone instantly reveal the identity of everyone in the photo.

A new iPhone app called KLiK performs real-time facial recognition to automatically identify and tag friends in photos.

“It’s our most recent evolution of both the platform and the consumer product that we’re offering,” said Gil Hirsch, the CEO of the facial recognition technology platform Face.com, which launched the app.

“We noticed that at parties or events there were many photos being taken but only a few were actually getting tagged.”

By connecting with Facebook, the app scans friends’ photos to develop a facial profile of everyone in a user’s network. The app identifies people by matching faces in photos taken with, or uploaded to, the app to these profiles.

Because the app relies on the connection to Facebook, only friends in a user’s network can be identified.

“It’s not like you can point this at someone on the street and make it work,” said Hirsch.

But the app does include a learn mode to use for friends who are not on Facebook. It allows users to teach the app who someone is by pointing the camera at them and manually entering their name.

“It’s all private and on your device only,” explained Hirsch, adding that the person will then be tagged automatically.

“I use it to tag my children so that I can later search for all the photos I took of them.”

Users can also apply Instagram-style filters and share photos via Facebook, Twitter or email.

Although the app is only able to identify Facebook friends, or people entered manually, some critics are concerned about privacy issues.

“This system has been engineered from the get-go to preserve privacy and also deliver a social fun value and nothing creepy,” Hirsch responded.

The company, which was established in 2009, has created several other apps, including Photo Finder, a Facebook app that scans friends’ photos to identify photos of you that were never tagged.

The company also provides technology for facial detection, which is distinct from recognition because it reveals information about subjects in a photo without revealing identity. The technology can reveal gender, mood, and even age.

“We provide a minimum and maximum and approximate age guesstimate, only using the facial information in the photo — nothing else,” Hirsch said.

In 2010, Face.com made their underlying facial recognition technology freely available for developers to incorporate into their own applications. Since then 45,000 developers have made use of their technology.

The company says KLiK is approximately 90 percent accurate.

(Editing by Patricia Reaney)

Article source: http://feeds.reuters.com/~r/reuters/technologyNews/~3/Om4PmSnLmIk/us-app-klik-idUSBRE84K0DA20120521