December 10, 2009
Makers of search engines like to market themselves as smart, using the most intelligent technology to find the best websites on the Internet for users’ queries. In a recently reported study, a security researcher showed how one provider, Google, proved itself to be head and shoulders above its competitors, at least in one specific aspect of search.
Most of us are familiar with the problem of phishing, whereby certain parties attempt to learn personal and private information about computer users, often for the purpose of perpetrating identity theft-related fraud. One of the methods to gain access to this data is to direct unsuspecting users to malicious websites that appear to be legitimate business addresses. These sites attempt to fool users into giving up their personal information, or they contain viruses that are down-loaded onto the users’ computers when visited, allowing outsiders access to sensitive data on the infected machine. In either case, the success of the ruse depends upon tricking users into clicking onto the malicious website.
Using his knowledge of search engine protocols and how they rank sites, Jim Stickley, CTO and co-founder of TraceSecurity, an information technology security company, created a bogus website that looked as if it belonged to the Credit Union of Southern California, a real business that agreed to be part of the experiment. Interestingly, Stickley found that his site received a number two and top rankings (even ahead of the genuine Credit Union site, in the latter case) on Yahoo and Microsoft’s Bing search engines, respectively. In contrast, corresponding Google searches placed the bogus site no higher than on Page 6. During the eighteen months that the fake website was in operation, more than ten thousand users clicked over to it. Fortunately for them, Stickley’s experiment was not malicious and these users were redirected to the genuine site.
Search engine providers are famously secretive about how they process users’ queries, both for competitive and security-related reasons. Yahoo declined to comment for the article. Microsoft addressed the problem and subsequently removed the bogus Credit Union site from Bing’s search results.
This experiment provides another illustration of the never-ending cat-and-mouse game played between security officers and engineers and hackers. A search quality engineer at Google described the process as a type of Internet “Whac-A-Mole” with hackers creating new potential vulnerabilities that pop up each time engineers address an existing one. This rivalry drives continuing technology innovation and promotes the development of new products and services in the security and life safety industry. Our interactions with large and established companies in this industry have shown us that they are always on the lookout for new technologies that have demonstrated a significant level of market acceptance and are willing to aggressively pursue those targets that meet their strategic needs.
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Posted by Peter Yu ptyu@gtadvisors.com
December 8, 2009
Yesterday, ARPA (Advanced Research Projects Agency) announced a $100 million round of high-risk, high reward funding for novel projects in:
Electrofuels – Specifically seeks projects that use microorganisms to harness chemical (or electrical) energy to convert carbon dioxide into liquid fuels.
Innovative Materials & Processes for Advanced Carbon Capture Technologies – This seeks to develop technologies to capture carbon dioxide from coal-fired power plants, thereby preventing release into the atmosphere.
Batteries for Electrical Energy Storage in Transportation – ARPA seeks to fund ultra-high energy density, low-cost battery technologies for electric vehicles.
A nice summary of this by Wired, including commentary about some private companies in these areas is found here).
Why we particularly like this program is it represents a wonderful funding opportunity for ideas and teams that, frankly, venture capitalists would not touch with a ten foot pole. Success in funding will be based on uniqueness and cleverness of the ideas, and not the business model, scalability, leverage or established market size. There will be plenty of opportunity for fast followers or derivative business models based on the success ARPA sows; this funding should improve the flow of ideas to commercial ventures.
Leave a Comment » | Technologies, Topics on Our Mind | Tagged: Alternative Energy, Energy Storage, Public Policy | Permalink
Posted by Dennis Gallagher dgallagher@gtadvisors.com
November 30, 2009
Sensors are a theme we return to often for two reasons; 1) photonic components are an important part of novel sensor/spectroscopy solutions and 2) this is a large addressable market for optical component manufacturers.
The grand theme is that in a modern networked society, sensors are needed to provide the data for solutions to any number of societal ills such as pollution, security, traffic congestion, energy consumption and public health. Over the past year, this theme has increasingly gathered attention as practical sensor solutions for broad deployment have emerged. Building upon the biochip solution we highlighted last week, this week Jeremy Hsu at LiveScience.com has a great article discussing just such a broadly deployable solution. Jing Li of NASA’s Ames Research Center has created silicon-based sensing chip containing 64 nanosensors capable of sniffing out low amounts of ammonia, chlorine gas and methane. Added to commercial cellphones, these microsensor’s data are then broadly available through the existing communications infrastructure.
Bright ideas such as this are taking us one step closer to solutions to the identification and location of public hazards.
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Posted by Dennis Gallagher dgallagher@gtadvisors.com
October 8, 2009
With global markets continuing to extend their gains from the March lows, largely glossing over the bad news and focusing on the good, can it be long before the flood gates open for IPOs and secondary stock offerings? About half my career was spent as an equity research broker calling on professional money managers with what I believed were my employer’s best ideas. That portion of my career started in 1981 at L F Rothschild Unterberg Towbin. I was a rookie so in late ‘81 and early ‘82 I was calling on the people he didn’t wish to call in his account base. I began to get some of my own accounts in early ‘82 in places where Rothschild seldom called with any consistency. I was anxious to pull in commissions from these accounts that had seldom done business with the firm and the only way I could imagine that would happen was by making the research calls. I didn’t appreciate that I was flying into the teeth of a recession, but it frankly would have been like being a broker calling this past winter with buy recommendations for clients. Six months later and you look like a genius.
GDP Declines in seven largest recessions
Image Source: Christopher Dodds, Eleutherian, September 18, 2009
The bull market ensued later that summer and Rothschild became know as one of the original “four horsemen” of the technology investment banking world. The bulls ran, stocks began to get stretched in their valuations so the bankers said let’s give them new merchandise. The IPOs began coming as a few are today. So did secondaries for companies that had an interesting story about what the proceeds could do for their prospects. Eventually the quality of the IPOs and the stories behind the secondaries began to either become less compelling or they just reached to point of soaking up the last dollars out there to support the market.
To make a long story short, I saw this cycle repeat itself in the next twenty five years and one lesson that I think I learned is that the bull run isn’t over until Wall Street has its chance to make a pile of money peddling a whole lot more equity offerings than we have seen coming off the March lows and a recession that most now believe has passed its bottom.
This recovery will be different than many before it for lots of compelling reasons, but we are in a recovery and the equity and debt markets will become more a more substantial source of capital growth than they have been thus far. From Greenwich Technology Advisors’ perspective that means management and their boards should be open to mergers and acquisitions if they do something meaningful for the future prospects of the company because investors will likely have the appetite to invest in a well conceived plan.
Leave a Comment » | Thinking About M&A?, Topics on Our Mind | Tagged: Alternative Energy, Hardware, Imaging, IPOs, M&A, Markets, Nanotechnology, Optical Components, Security, Software & IT Services, Solar Energy, Spectroscopy, Telecom, Terahertz | Permalink
Posted by Kevin C. Slocum, Managing Director, kslocum@gtadvisors.com
September 30, 2009
Corporate blogs reflect not only the interests, but also the psyche of the writers. It has been a little over a year since the launch of GTalk, and pondering that year, it struck me that the blog is nothing like I expected. To some extent, Peter and I have perhaps gone a tad too far off the technology deep end (Peter less so because his industry pieces have been among our most popular). Perhaps the closest to the original target – what we do for our clients – has been Kevin.
Ruminating over our writings, I decided to try Wordle, an online toy for generating “word clouds” from text. The clouds give greater prominence to words that appear more frequently in the source and I chose just Kevin’s writings for analysis.
Image Source: www.wordle.net
Some things stand out that reflect the past year:
- Business is more important than technology. Market sits at about an equal footing.
- Transaction has not stood out as much as we would like.
- Public company, valuation and environment stand out too much, but reflect reality.
- Time appear frequently – It is important to our clients.
- Opportunity trails more than it should; it is a word we have been using more frequently of late.
Over the next year, we aspire to shake this up a bit and increase the frequency of works such as position, process and strategic to where they belong.
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Posted by Dennis Gallagher dgallagher@gtadvisors.com
September 19, 2009
On Thursday, March 5th, the Department of Labor reported initial unemployment claims for the weekend February 28th at 639,000. This came on the heels of 670,000 the prior week and a string of increasingly bad numbers in the prior weeks. With each week economists would talk about unemployment rising to 10% or more. With each crippling prediction would come another crushing blow to the stock market. The difference for me that time around was that I said to myself how many times are we going to discount 10% unemployment. This was getting ridiculous and I felt I needed to start building a list of stocks to buy.
With the market rising on March 10th, I made the plunge and bought eight stocks from a variety of sectors. While I would like to brag about my timing, about two months later with all of the stocks up, I began selling them off with a 16% profit that at the time felt very good. Yet I have kept track of those stocks since I sold and if I held them all today the return would have been over 50%. Fortunately I came to my sense weeks after selling and put some money back to work, but through out this bull run I have left a lot of money on the table and remain nervous about how sharp the rebound in this market has been.
I read the WSJ this morning and focused on an aritcle by James Grant titled “From Bear to Bull”. While I don’t know Grant well, I do know he is regarded a voice of reason, which sometime is synonymous with bear. He made a well reasoned case for a very strong recovery, that made me look at my own nervousness about the market being ahead of the recover seem like it could be misplaced concern.
We are seeing a continuation of very cautious behavior by our potential clients, a cautiousness that for me has felt like squandered opportunity. What if the recovery that springs from the fiscal and monetary stimulus of the past year does not produce the tepid, jobless recovery that so many are predicting? Would you you be acting the same way? Perhaps you should be considering a different course than the one you are on.
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Posted by Kevin C. Slocum, Managing Director, kslocum@gtadvisors.com
August 28, 2009
On Wednesday it was reported by Bloomberg that GE had hired JPMorgan Chase to help it sell its GE Security division. Potential buyers of the unit include Tyco and United Technologies. It was elsewhere reported that Robert Bosch might also be in the mix.
In a September 2008 interview, GE Security’s CEO Dean Seaver stated that the unit generated about $1.8 billion in sales in 2007 and expected this to grow to $3 billion by 2011. Unnamed sources in the articles say they expect the unit to sell for about $2 billion. This announcement, coming on the heels of GE’s announced sale of 81% of its Homeland Protection unit to Safran this past spring, continues the company’s divestiture of a business that it aggressively built up during the earlier part of this decade.
Back in 2004 and 2005, GE made two major acquisitions in the security area. First it bought InVision Technologies, a maker of baggage screening systems, for $1.1 billion. Later, it outbid a number of buyers, most notably Schneider Electric, paying $1.4 billion to SPX Corporation for Edwards Systems Technology (EST), instantly catapulting it into the top four suppliers of fire alarm systems.
So why, after investing so much, has GE decided to divest itself of this business? We see a few characteristics of the security industry that work against GE’s market strategy of being the #1 or #2 brand in fast growing markets, namely:
- Limited Growth – Much of the growth in security product markets is linked to commercial construction, and does not fit with GE’s announced plan to pursue higher growth markets. This is likely the reason it announced desire to sell or spin out its iconic Consumer & Industrial division earlier in 2008, a process that was put on hold at the beginning of this year because of the poor state of credit markets.
- Very Low Risk Tolerance – Greater-than-GDP growth for a company as large as GE must come from taking market share. Security industry customers, by nature and design, have a low tolerance for risk. Thus, sales of security products rely on relationships developed over long periods of time and customers are not quick to embrace change. It is exceedingly difficult to quickly capture substantial chunks of market share from an incumbent competitor in the security market.
- Highly Fragmented – The market for security is highly fragmented and regional, with many large, established players. Global or even national consolidation under one brand is difficult, if not impossible to accomplish rapidly.
Other large players in the industry often keep the brand identities of their acquisitions in order to maintain relationships and hold the trust of existing customers. For example, Honeywell has a number of panel brands including: Fire-Lite-FCI, Gamewell and Silent Knight. More recently United Technologies and Schneider have maintained their Lenel and Pelco brands post-acquisition.
The sale (and potential breakup) of GE Security represents an opportunity, not only for the large competitors, but also for smaller, regional players to pick up market share and grow. As far as a potential buyer exiting the market, GE Security has not been terribly active on the M&A front, with no marquee acquisitions since it closed the EST transaction in 2005.
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Posted by Peter Yu ptyu@gtadvisors.com
August 20, 2009
In old Star Trek episodes, every time the crew of the Enterprise would beam down to a new planet’s surface, Commander Spock would consult his trusty tricorder and analyze the composition of the atmosphere or nearby objects of interest.
More recently, the development of a different type of portable, multi-purpose device came to light when BEA Systems announced that it had won a contract to produce, maintain and provide logistical support for up to 200 laser target locator modules per month under a five-year indefinite-delivery/indefinite-quantity contract worth up to $347 million. These modules weighed less than 5.5 pounds and incorporated several functions that were previously used by soldiers in separate devices including:
• Standard visible optics
• Thermal imaging camera
• Laser range finder
• Compass
• GPS receiver
In modern warfare, where low-level conflict and guerrilla tactics prevail, such modules will put more technology into the hands of the war fighter and provide crucial tactical information that can sway the outcome of a battle or firefight strongly in their favor. We view this announcement as part of a trend where a number of formerly disparate capabilities are miniaturized and integrated into a single portable device.
The producers of multi-function modules such as the laser target locator are generally large defense contractors that have areas of expertise covering a wide range of technologies. In addition, these companies are typically very capable in product design and are accustomed to integrating large and complicated systems. Such enterprises place high value on engineering and technical capabilities and often fill gaps in their in-house knowledge with strategic acquisitions. We noted one example of this gap-filling with FLIR Systems’ announcement of its acquisition of Salvador Imaging, a provider of charge coupled detector (CCD) technologies. This acquisition enhanced FLIR’s ability to cover spectral bands outside of long wave infrared (IR), where the majority of its systems operate.
Leave a Comment » | Technologies, Topics on Our Mind | Tagged: Imaging, Security, Sensors, Thermal Imaging | Permalink
Posted by Peter Yu ptyu@gtadvisors.com
August 19, 2009
In the heat of the summer (August 5th), Avago (AVGO) completed its IPO originally filed in 2008. We highlighted back in April this was the last remaining optical components related IPO in the queue and as of today there are no others that directly impact the optical communications space. Avago is one of the leading optical transceiver and serializer/deserializer ASIC manufacturers for the communications industry, but it is primarily recognized by the financial markets as an analog semiconductor manufacturer.
IPOs as financial fuel to grow technology companies continues to appear unfriendly to communication and optical component companies. Of the roughly 131 companies currently in the IPO pipeline, I would loosely characterize only 28 as technology companies, and these may be characterized as evenly spread among Internet, Energy (including solar), IT services and Medical Technology. The remaining few companies include environmental services (Safety-Kleen) and radiation detection (Mirion Technologies). The sole communications oriented company in this pipeline is Broadview Networks, provider of retail end-customer voice and data products and services.
As business normalizes the public companies in the communication and optical component industry should be opportunistic in acquisitions, utilizing their liquid shares, despite low share prices. This environment provides an opportunity for accretive growth at compelling relative valuations that may not last, as cash competition for the best private companies or a better market for IPOs could reappear quickly in a perceived recovery.
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Posted by Dennis Gallagher dgallagher@gtadvisors.com
July 24, 2009
There have been a lot of companies that have been called “technology” over the years, but the word connotes thoughts in the minds of investors, thoughts of strong growth, strong share price appreciation and excitement. Why do I mention this? I was amused this morning when I took my daily browse of the financial headlines and came across one on the Yahoo! Finance site picked up from Reuters that said, “Microsoft raises specter of doubt on tech recovery“. Could it have anything to do with the maturity of the personal computer business? There was a day when the mainframe computer business was a tremendous growth business. It was follow buy minicomputers and workstations. Do any of those markets conjure up the excitement and thought if big investment gains? Yes, they are technology, but this is not the stuff that is going to lead us on the other side of the recession, nor are PCs running Microsoft operating systems. Apple is about the only participant creating excitement in that world and it certainly has less to do with the company’s PCs than the other things it is doing. There will be a tech recovery, but it is going to be in the important new products our industry is producing. The mature technology of Microsoft and others will see improving trends, but it has been quite a while since this company and it’s piers have generated exciting growth and great profits for portfolios.
We see plenty of opportunity in the technology markets, you just can’t remain stuck where you’ve been. That’s what we live for in our M&A practice; to help companies reposition for the growth of tomorrow and shed that past to those that wish to hold on to it. If inflation is going to be something we are wrestling with in the coming years, the emerging technology markets may be one of the few places investors can turn to stay ahead. Don’t spend much time worrying about the headlines.
Leave a Comment » | Technologies, Thinking About M&A?, Topics on Our Mind | Tagged: Alternative Energy, Fiber Lasers, Imaging, IR Cameras, M&A, Nanotechnology, Optical Components, Security, Sensors, Software & IT Services, Solar Energy, Telecom | Permalink
Posted by Kevin C. Slocum, Managing Director, kslocum@gtadvisors.com
