The week in tech has seen the Nasdaq composite index hit a record closing high in the US while closer to home TPG and M2 have both shown their hands in their respective bids to takeover iiNet.
The tech heavy Nasdaq broke a record that stood for 15 years with three big players; Microsoft, Amazon and Google, doing most of the heavy lifting. The index closed at 5,092, and on the same day the S&P 500 also inched above its previous high to post its own record close at 2,227.69. Apple helped lift the index a few days later as it reported earnings above market expectations.
The news has been taken with restrained exuberance as the tech bubble of the year 2000 is still fresh in the memories of many investors. Opinion is split, with optimists suggesting that “this time it’s different”, that lessons have been learned and the companies leading the charge are more mature with solid foundations and expectations that are more realistic.
NB by Thursday the 30th of May the Nasdaq had retreated to below the 5,000 point in line with broad weakness on Wall Street.
M&A action
The battle for scale between the mid level internet service providers is heating up as M2 attempts to trump TPG’s offer for control of iiNet. TPG opened the bidding last month with an all-cash offer and M2 has responded with a seemingly more generous offer but one which is dependent on the M2 share price.
The victor could leapfrog Optus to become the country’s second largest ISP and with the rollout of the NBN starting to take shape it’s more important than ever that these vulnerable players protect themselves with scale through a strong customer base.
TPG now has until COB Tuesday to come back with a counter offer. At the same time the company has upped its stake in Amcom to 10 per cent in a move that commentators are saying is designed to act as a blocking stake in the proposed merger of Amcom with Vocus Communications. The midnight oil will surely be burning over in the TPG offices.
Growth through innovation
Telstra Corporation Limited
(ASX:TLS) launched its second Muru D startup accelerator in Singapore following the launch of its first in Sydney in 2013. Australia’s largest telco will provide seed funding, work space, mentoring, coaching and Telstra access. The move is aiming to attract the region’s best digital talent, foster local technology innovation and grow the entrepreneurial ecosystem across Southeast Asia.
Freelancer Limited
(ASX:FLN) has launched a new local jobs initiative allowing users to match with freelancers in the local area. The enterprise expands the Freelancer.com marketplace into over 100 new location specific skills including pick up & delivery, local plumbers, electricians and builders as well as event management and catering services.
Earnings forecasts
Hills Limited
(ASX:HIL) has downwardly revised full year guidance due to a downturn in spending and lower margins. The company now expects underlying profit of $11 million to $14 million down from previous guidance of $18.5 million to $19.5 million.
Xero Limited
(ASX:XRO) (NZX:XRO) says it has delivered exceptional revenue growth of 77 per cent in fiscal 2015. Subscription revenue was up 81 per cent to $121 million with growth of 475,000 new customers. Employees grew by 403 to a global staff of 1,161. The cloud software accounting firm still posted a net loss of $69.5 million as it continues its investment in product development, sales and marketing.
Quickflix Limited
(ASX:QFX) says its customer growth has continued over a quarter in which competition heated up with Netflix and Stan launching their services. The video streaming service increased its paying customers by 6 per cent and overall customers by 3 per cent over the March quarter.
Partnerships for growth
3P Learning Limited
(ASX:3PL) has partnered with Microsoft to use the Microsoft Azure cloud platform for the World Education Games in 2015. Millions of students across the globe are expected to take part in the World Education Games, an online event due to take place in October. What began as a maths based event called World Maths Day has now been expanded to include World Literacy Day and World Science Day.
Freelancer Limited
(ASX:FLN) has generated record cash receipts in the first quarter of this year and predicted strong revenue growth will continue. The online job outsourcing company has described its quarterly performance as exceptional over a period in which it surpassed 15 million registered users.
Singapore Telecommunications Limited's
(ASX:SGT) Optus is set to join Microsoft’s cloud operating system network in Australia. The telco says the partnership will offer its enterprise and government customers a Microsoft Azure-enabled solution.
Acquisitions
M2 Group Limited
(ASX:MTU) confirmed media reports it has made a competing bid for 100 per cent of iiNet. iiNet agreed to an $8.60 per share all cash takeover bid from TPG that valued the company at $1.4 billion. M2 Group says it has offered an all-scrip bid worth around $11.52 per share or around $1.8 billion. M2 says under its proposal iiNet shareholders would received 0.803 M2 shares per iiNet share plus a 75 cent special dividend. iiNet shareholders would then own around 42 per cent of the enlarged group with iiNet continuing to operate as a standalone brand.
After market close yesterday, M2 clarified that based on its share price before the offer was made, it valued its offer to iiNet at $10.00 per share, a 16.3 per cent premium to the TPG offer.
M2 has confirmed that the board of iiNet has recognised its takeover offer for the company, triggering TPG’s matching rights under its earlier offer. M2 Chairmen Craig Farrow says the company’s pleased that iiNet acknowledged the premium embedded in its offer plus the potential value of synergies. TPG now has the right but not the obligation to submit a counter proposal within the next three days to lift its cash consideration of $8.60 per share plus special dividend.
Freelancer has agreed to pay $9.5 million for Escrow.com. The California-based company provides online escrow services for secure e-commerce.
Escrow.com counts eBay and Autotrader.com among its clients and is also a strategic partner of the US Commercial Service designed to grow US export volume.
Telstra has tied up the purchase of Asian telecommunications and services provider Pacnet Limited for $US697 million. The telco announced the deal at the end of last year as part of its push beyond Australia as says the asset will now be integrated into its business and double its customers in Asia.
Vocus Communications Limited
(ASX:VOC) has taken a 14.5 per cent stake in Macquarie Telecom Group as a strategic investment. The telecommunications and data services company says the equity swap transaction of $15.6 million will not have a material effect on its business.
Biotechs
Shares in Cellmid Limited
(ASX:CDY) soared more than 20 per cent after reporting what it describes as outstanding results for its hair growth product. The biotechnology company says evolis ONE has been shown to reduce hair loss, increase hair growth and improve hair recovery and release in the study group.
Actinogen Limited
(ASX:ACW) says it has raised $10 million through an institutional placement that will go towards a Phase II trial of its promising Alzheimer drug Xanamem. The oversubscribed capital raising was lead by KTM Capital and Forrest Capital with an additional $1 million raised by a shareholder share purchase plan.
Impedimed Limited
(ASX:IPD) says it has secured another NCI designated cancer centre for the post approval trial of its L-Dex. The L-Dex technology helps physicians and surgeon detect changes in cellular fluid levels to detect lymphedema post-surgery.
-- John Treadgold
