Acquisitions of Cloud Computing Startups Speed Up
A startup is defined as a company with a limited operating history. A startup is usually born out of an innovative idea, and the founder or founders have one of two objectives – grow the company until it is acquired, or continue to operate it themselves. When a larger company acquires a smaller one, it usually does due to one or more of the following reasons – its product, its people or its market.
With cloud computing being such a new technology, there is a lot of innovation taking place. Consequently, startups have flourished (See: Archive: Startups). While some have warned of a potential meltdown reminiscent of the dotcom bubble, scrutiny of business models and technologies is more stringent now (See: Are Cloud Computing Stocks Overvalued?). The last few weeks have seen a surfeit of acquisitions of cloud computing startups.
Three of them are covered below, in chronological order.
The first acquisition on the list is network company Citrix Systems’ purchase of Cloud.com in mid-July, in a deal rumored to be worth at least $200 million and possibly going up to $500 million. Cloud.com’s product CloudStack, based on the open-source OpenStack project, allows companies to build on-premise private clouds like Amazon’s EC2 upon their traditional data centers. In addition to the intellectual property, Citrix gets access to Cloud.com’s impressive roster of customers, including Zynga (See: Zynga, the Latest Cloud Computing Success), Tata Communications, Bechtel and GoDaddy. The acquisition brought a lot of talent to Citrix, including Cloud.com CEO Sheng Liang who will continue to lead the design, architecture and technology of the CloudStack product line and report to Sameer Dholakia, group VP and GM of the newly-formed Cloud Platforms product group at Citrix.
The second deal on the list is Taiwanese hardware giant Acer’s bid for Mountain View-based iGware for $320 million plus another $75 million in performance-based payment. Acer plans to leverage iGware’s technology to deliver a new service called Acer Cloud “to serve and benefit Acer customers, and enhance brand value.” Acer said that it expects Acer Cloud to be integrated into “all Acer products, including PCs, tablets, and smart handheld devices.” Through this acquisition, Acer is making the jump from being merely a hardware provider to a company that has multiple footholds in the computing world. While this acquisition does have its possibilities, several analysts have criticized the logic behind this deal given that iGware has no big clients other than Nintendo. At the same time, Acer Chairman J.T. Wang has gone on record that Nintendo supports the deal and has agreed to pay Acer a service fee of $20 million to $30 million every year after the acquisition.
The third and final one on this list is also a Taiwanese company acquiring an American firm. Taiwanese smartphone manufacturer HTC Corporation has just announced its acquisition of Dashwire, a Seattle firm that specializes in cloud services to synchronize smartphones. While the terms of the deal have not been disclosed, a figure of $18.5 million is rumored. “Cloud services are key to delivering the promise of connected services to our customers,” said Fred Liu, HTC president of engineering and operations, in a press release. “People want access to all of their important content wherever they are on any device. The addition of Dashwire’s cutting-edge sync services and deep mobile cloud experience strengthens our ability to deliver these services in a more powerful way.” The acquisition is also expected to bolster HTC’s patent portfolio to stave off future litigation from competitors, such as the one the company is currently embroiled in with Apple.
By Sourya Biswas