NetSuite, one of the companies in my previous list, was acquired last week by Oracle for 9.3 billion USD. It’s time now to review our list and add a few name
Reflection
When I published first version of this article on 10 June 2016, I didn’t expect it to be my most successful article on LinkedIn. It received 77,358 views, 3,549 likes, 98 comments and 1,118 shares. Thank you for that! Another interesting effect was that my follower base rose from 4,000 to 7,000. The article also led to numerous discussions and suggestions about companies that should make it to the list. So I made a promise to update my TOP 25 every time a company is marked off the list.
NetSuite and Oracle
Let’s revisit what I said about NetSuite on 10 June 2016. NetSuite was included in my category, Watch list [I can’t decide on a theme yet], as number 3. Here is what I wrote:
“NetSuite – a similar story to Workday. Why would anyone buy them? Maybe because of the cheap market cap of 6,9 billion USD, but revenue is less than 1 billion USD. So the question is why would IBM, Oracle, Microsoft, or SAP buy them? I don’t think they can challenge Salesforce dominance or pose enough of a challenge such that incumbents SAP or Oracle would pay a premium. (I may be wrong. I don’t know enough to justify the theme. Feel free to suggest.)”
What happened next? After publishing, I received, exactly as I had asked, tips from people on why someone would buy NetSuite. It was a clear battle between Microsoft, Oracle and SAP. Winner: ORACLE
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Now, ladies and gentlemen, may I present you:
List of top 25 tech companies to watch
For better readability there are four categories:
- Public companies (themes) – companies already traded on the stock exchange.
- Public companies (watch list) – interesting companies with potential.
- Pre-IPO companies (list) – fast growing tech companies not yet IPO.
- Pre-IPO companies (Watch list) – Non-IPO companies worth watching.
Any company missing? Please feel free to suggest it in the discussion under the article or contact me via LinkedIn message or Inmail.
Public companies [themes]
- [Big cyber security consolidation] – I am reiterating my suggestion that the next big consolidation must happen in the Cyber Security space. The “Three Horsemen of the Cyber Apocalypse,” FireEye, Palo Alto Networks, and CyberArk are ripe for the picking: CISCO (sitting on piles of cash and doing stock buybacks), INTEL (that again must grow), SYMANTEC (losing market share and just to sit and wait while MICROSOFT (slowly starts to acquire one cyber security startup after another). Something must happen here!
Potential buyers: Defensive (Cisco, Intel, Symantec), Offensive (Microsoft, IBM, HP) Estimated price (range): 5 - 25 billion USD.
LAST RATING: 1 on public company list / CURRENT: 1 on public company list - PEGA SYSTEMS – I am issuing a new rating for Pegasystems. After NetSuite acquisition this is the hottest enterprise takeover target out there. Oracle, Microsoft, Salesforce and SAP need to either acquire or stop PEGA. This will be a bidding war, where if PEGA goes to Oracle, can result in a new cloud empire. Oracle Cloud + NetSuite + PEGA is a dangerous combination. As will combining PEGA with Microsoft Dynamics PG (former PEGA) especially now that Microsoft launched Dynamics 365. SAP PEGA with SAP HANA also makes a lot sense. To Salesforce.com PEGA is a defensive strategy. I don’t think IBM and HP will join the race so I dropped them from the list.
Potential buyers: Offensive (Microsoft, Oracle, SAP), Defensive (Salesforce) Estimated price: previous 8 billion USD. UPDATED: 10-15 billion USD.
LAST RATING: 3 on public company list / CURRENT: 2 on public company list - TWILIO (NEW) – this company is new to our hotlist, the reason being it was not at IPO when the previous article was published. However TWILIO has something which makes it, with its very favourable 3.6 billion USD market cap, a very good acquisition target. They have a unique enterprise product that bridges the gap between telco (voice) and cloud (technology). Twilio does what none of the big enterprise cloud players can do – voice. This makes them an immediate target for various strategies.
Potential buyers: Offensive (Salesforce, Microsoft, IBM), Defensive (Cisco, Nokia, Ericsson, Huawei, ZTE) Estimated price: 5 billion USD
LAST RATING: N/A / CURRENT: 3 on public company list - Service Now – still the hottest service cloud out there but compared to the direction it’s taking in the market I am decreasing my previous rating by 2 points.
Potential buyers: Defensive (Salesforce), Offensive (Microsoft, Oracle, SAP, IBM, HP, Fujitsu) Estimated price: 15 billion USD.
LAST RATING: 2 on public company list / CURRENT: 4 on public company list. - Tableau – I still believe this is an acquisition target. I’m keeping it high on my list but reducing its rating by 1 point.
Potential buyers: Defensive (Microsoft, SAP, Oracle, IBM), Offensive (Salesforce) Estimated price: 6 billion USD.
LAST RATING: 4 on public company list / CURRENT: 5 on public company list
Watch list [Follow closely, do more homework]
- Box (LAST RATING: 1 on watch list / CURRENT RATING: 1 on watch list)
- Workday (LAST RATING: 2 on watch list / CURRENT RATING: 2 on watch list)
- Veeva Systems (LAST RATING: 5 on public company list / CURRENT RATING: 3 on watch list)
- Hortonworks (LAST RATING: 6 on public company list / CURRENT RATING: 4 on watch list)
- [IT Ops Play] New Relic or Splunk(LAST RATING: 4 on watch list / CURRENT RATING: 5 on watch list)
Pre-IPO companies
- Slack – this company is the biggest surprise from the last round. It was number 1 on my watch list of pre-IPO companies but now is the absolute number one. Slack is a clear game changer and disruptor of various highly profitable franchises. Who should buy Slack and do it quick? 1) Microsoft – if Slack goes to Google, Microsoft Office 365 will have a massive competitor, 2) IBM – Slack is a Lotus Notes killer. Anyone who lived through the hell of using the worst enterprise application in the universe knows how far behind, somewhere in 19th century, Lotus Notes is from Slack and Office 365. If IBM buys Slack it can stop the massive churn and hate of Lotus Notes users (I am one of them) 3) Google – if Google for Work wants to finally create traction Slack is the way to go: integrate with Gmail, Hangouts, Google Docs and you aim directly at both IBM and Microsoft, 4) Salesforce – will likely join the bidding war too because the potential ability to attack both IBM (Lotus Notes) and Microsoft (Office 365) will be too great a temptation to resist for Marc Benioff, 5) Facebook – Marc Zuckerberg has long dreamt of getting Facebook to enterprises and companies. If he gets Slack it will be a direct blow to all competitors in this space: Google, Microsoft, IBM and Salesforce.
Potential buyers: Defensive (Microsoft, IBM), Offensive (Google, Salesforce, Facebook) Estimated price: 5 - 25 billion USD.
LAST RATING: 1 on pre IPO watch list /CURRENT: 1 on pre IPO list - Docker – this company is still my favourite and I believe in the potential of Docker. The only change from the last list is the massive growth of Kubernetes market share, another container technology to watch. Therefore I am decreasing my estimate to 15 billion USD.
Potential buyers: Defensive (Amazon, Microsoft, Salesforce), Offensive (Google, HP, IBM, Red Hat, VMWare) Estimated price: (NEW) 10 billion USD / (PREVIOUS) 20 billion USD
LAST RATING: 2 on pre IPO list / CURRENT: 2 on pre IPO list - InsideSales – Oracle’s willingness to spend 9.3 billion USD for NetSuite and LinkedIn’s 26 billion USD acquisition by Microsoft indicate that the giants are willing to use the cash to reduce the impact of disruption caused by the likes of Salesforce.com. InsideSales is an ideal target for Oracle, Microsoft, SAP and Salesforce.com. It will very likely be a new bidding war. I am dropping IBM from the list of buyers as this will be a SaaS-only war.
Potential buyers: Microsoft, Salesforce, Oracle, SAP Estimated price: (NEW) 5 billion USD / (PREVIOUS) 3,5 billion USD
LAST RATING: 5 on re IPO list / CURRENT: 3 on pre IPO list - MuleSoft – based on many conversations I had after including MuleSoft in my TOP 25 list, I am more and more convinced they are a target. A big one. Especially by the likes of Salesforce, Oracle, Microsoft, IBM, and HP. I can even imagine Informatica having an interest in putting a stop to MuleSoft. Of course there is also an “Informatica LBO-like” scenario in play where some P/E would acquire MuleSoft. The value of the company could be quite high and that’s why my estimate increased because of the likely bidding war between Salesforce, Oracle, Microsoft, IBM, HP, and Informatica.
Potential buyers: Salesforce, Microsoft, Oracle, IBM, HP, informatica Estimate price: (NEW) 3,5 billion USD / (PREVIOUS) 2 billion USD
LAST RATING: 7 on re IPO list / CURRENT: 4 on pre IPO list - Betterment (NEW) – this is a new name on our list and a controversial one. Because Betterment, unlike any of the previous companies, is not a pure technology company but a so called “robo-advisor”: An automated investment system that replaces standard passive investments where you need a certain level of capital (e.g. 200k USD and more) to be allowed to invest. Betterment allows you to start with almost nothing (there is no minimal capital requirement) and, unlike passive investment vehicles, charges very low fees. It’s hard to decide if Betterment is a technology company or purely financial. I argue Betterment should be part of our list because Fintech is a combination of technology and finance. Betterment wouldn’t exist without the technology behind it. And given that it’s estimated that the Robo-Advisor market in the US will reach 2 trillion USD in AUM (Assets Under Management) by 2020, there will be many who will be interested in owning the most successful robo-advisor on the market.
Potential buyers: Large banks such as: Citibank, Wells-Fargo, JP Morgan Chase…etc., Large funds such as: Fidelity, Vanguard, Charles Schwab….etc. Estimated price: 10 billion USD (depends whether Fintech acquisitions will be measured by profit or disruptive potential of stealing AUM from incumbents)
LAST RATING: N/A / CURRENT: 5 on pre IPO list
PRE – IPO Watch list [Follow closely, do more homework]
- Digital Asset Holdings – I still love the company, which was my 1 in Pre-IPO list, just given the list of investors. See crunchbase (https://www.crunchbase.com/organization/digital-asset-2#/entity) that includes the likes of: JP Morgan, CME Venture, Goldman Sachs, Citigroup, Santander, ANB AMRO, Accenture, IBM… and others. I believe it will become an extremely strong company that will be one of the first Fintech IPOs, which will set the benchmark for future Fintech valuations. LAST RATING: 1 on pre IPO list / CURRENT RATING: 1 on pre IPO watch list
- Cloudera – I still believe in Cloudera and Hadoop. We’ll see what happens here. LAST RATING: 3 on pre IPO list / CURRENT RATING: 2 on pre IPO watch list
- Magento – yes someone will buy them but when? Let’s wait and see. LAST RATING: 4 on pre IPO list / CURRENT RATING: 3 on pre IPO watch list
- CipherCloud – yes someone will buy them but when? Let’s wait and see. LAST RATING: 6 on pre IPO list / CURRENT RATING: 4 on pre IPO watch list
- DocuSign – yes someone will buy them but when? Let’s wait and see. LAST RATING: 8 on pre IPO list / CURRENT RATING: 5 on pre IPO watch list
- Apttus – yes someone will buy them but when? Let’s wait and see. LAST RATING: 9 on pre IPO list / CURRENT RATING: 6 on pre IPO watch list
- Appirio – yes someone will buy them but when? Let’s wait and see. LAST RATING: 9 on pre IPO list / CURRENT RATING: 6 on pre IPO watch list
- Dropbox – yes someone will buy them but when? Let’s wait and see. LAST RATING: 2 on pre IPO list / CURRENT RATING: 6 on pre IPO watch list
- Ping Identity – received an investment of 600 million USD from PE. Surely a company to watch. LAST RATING: 4 on pre IPO list / CURRENT RATING: 9 on pre IPO watch list
- Gygya / Sprinklr – I wasn't sure which one to include so I put both as the last entry. LAST RATING: 3 on pre IPO list / CURRENT RATING: 10 on pre IPO watch list
And now....
Your Suggestions
Here are your suggestion from the last time....
- KRUX – Theme: “last independent DMP play”
- Zendesk – Theme: “could be bought by anyone”
- RPA – Robotic Process Automation (multiple companies: BluePrism, UI Path) – Theme: “robots are the next big thing”
- Gooddata – Theme “Analytics is still a hot thing”
- Walkbase – Theme “Personalized in-store shopping”
- Domo – Theme ”Analytics is still a hot thing”
- Kenshoo – Theme “Predictive marketing”
- Nice Systems – Theme “Big data for surveillance”
- InvenSense – Theme “IoT”
- Verifone – Theme “owns majority of US payment terminals”
- Marketo – Theme “Marketing automation is still a big theme”
- Device Authority – Theme “IoT Security”
- Marine CFO – Theme “Maritime optimization” Here is what we have so far. Please continue to send me your ideas.
BONUS
Special recognition in this round goes to Osvaldo Coelho for his suggestion.
Cisco Will buy Ericsson (https://www.linkedin.com/pulse/cisco-buy-ericsson-osvaldo-coelho)
Next update?
When any company (public / pre-IPO) on our list or watch list is acquired or, in the case of pre-IPO companies, makes it to IPO.
DISCLOSURE: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it.