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Vocus means businessIn the last two years, four potential buyers have looked, then decided not to buy the Vocus Group.

Last week Australian energy company AGL withdrew its A$3 billion takeover offer for Vocus. This came only two weeks after Swedish private equity firm EQT halted its $3.3 billion transaction.

In 2017 private equity firms Kohlberg Kravis Roberts and Affinity Equity Partners both withdrew bids. In each case, the deal floundered at the due diligence stage.

Bruised Vocus

It’s been a bruising experience for an already damaged Vocus. When AGL walked away from this week’s deal Vocus shares lost a third of their value.

On the surface, the bad news apparent during due diligence means there’s something bad in the financials that Vocus hasn’t disclosed to shareholders. It’s something that well-funded companies are not able to spot before bidding.

Reports in Australian media say that bidders walk away from Vocus because the plan to turn around the business is more complex than it appears from outside the company. There is something in this, but it is probably not the whole story.

Consolidation

Vocus is the result of a number of telecommunications industry mergers. It is a rare example of classic industry consolidation.

Along the way, Vocus acquired other companies. At times it has struggled to integrate the parts. That’s not uncommon in the telco sector.

Vodafone New Zealand acquired a number of businesses. Years later it has still not completely integrated the various back-end systems. Customer enquiries can mean service agents need to reference several screens to answer simple questions.

This Balkanisation is how large companies made up of smaller concerns often operate.

So long as there is plenty of forward momentum those tricky integration issues can be kicked down the road. Over time they can either be fixed or, for one reason or another, they simply stop being a problem.

The big Vocus problem

That’s a problem for Vocus, but it isn’t the big one. Far more serious is that Vocus’ Australian consumer business is losing money.

In part that’s because Australia’s NBN model has flattened the market to the point where it’s hard to turn a buck selling broadband. There’s no clear path to profitability.

AGL looked like a good buyer because it’s a power company. Combining power and broadband sales is a tried and tested strategy. If the AGL bean counters looking at Vocus’ books realised that could turn things around, the problem is worse than most of us thought.

Even though Vocus is, to some degree, a special case, it isn’t that out of line with the rest of the telecommunications industry.

No quick path to profit

All of which says bad things about the state of retail telecommunications. The private equity investors have looked and seen there is no quick path to profit.

More patient, longer-term investors like AGL, who have access to the magic formula of adding power sales to a broadband subscription don’t think it looks viable either.

If you work in the sector you might want to worry about that.

EQT Infrastructure’s A$3.3 billion takeover bid for Vocus Communications could see a new owner for the New Zealand business.

Vocus Group New Zealand includes the Orcon, Slingshot and CallPlus brands along with other assets. It is the third largest telco behind Spark and Vodafone.

The potential buyer, EQT Infrastructure, is a Swedish private equity investor.

Vocus commands good price

EQT’s bid, which became public on Monday, put a 35 percent premium on Vocus Communications’ trading price at the time.

Insiders say the bid is likely to succeed. Although there are other potential bidders waiting in the wings should EQT’s offer fall through. Either way, Vocus is likely to find a new owner soon.

The EQT bid comes only days after Infratil and Brookfield’s successful bid for Vodafone New Zealand. It suggests other telco sector mergers and acquisitions could be on the way.

This is not the first time investors have attempted to buy Vocus Communications. In 2017, private equity firms Kohlberg Kravis Roberts and Affinity Equity Partners, made a bid for the company. That was later withdrawn.

According to the Australian Financial Review, the key to renewed interest in the business is Vocus’s fibre assets.

Fibre infrastructure

Infrastructure is an increasingly popular investment class. The returns are relatively high and, in many cases, it faces little direct competition. Fibre assets of particular interest to infrastructure investors at present, they feel that its owners don’t always maximise its value.

The Australian Financial Review goes on to report it’s likely the buy will sell Vocus Communications’s retail business.

Presumably, this would also include Vocus’s New Zealand retail brands.

Vocus has New Zealand local fibre assets. It picked them up from the former FX Networks business now wrapped into the Vocus Group.

One interesting angle is that after 2022 regulated UFB wholesale prices will be based on network asset values. If fibre becomes a sought after asset for investors, that could put pressure on the regulated price.

HP’s EliteBook x360 1030 G3 is a premium business convertible laptop. It’s the kind of upmarket laptop a big company employer might hand you if they think you need portability and flexibility.

You might choose it yourself. It is a solid, no-nonsense choice with all the features a business user needs, although a touch expensive by 2018 standards.

While you can get more grunt and graphics for the same money or less elsewhere, you won’t get them in such a compact package and with such a quality feel. HP added security features to the business laptop that, depending on how you work, could tip the balance.

At first glance the Elitebook x360 looks like a tiny conventional clamshell laptop. It opens to show a full size keyboard and screen.

HP HP EliteBook x360 in different modes

Convertible

The Elitebook x360 is a convertible. Its 360 hinge means you can open it right up, then fold the screen under the keyboard to give you a tablet. It can also work in what HP calls tent mode to watch video or propped up on a flat service to give personal presentations.

HP says you can get “up to” 18 hours of battery life. Computer maker battery life estimates are often exaggerated. Even  so, you can expect to keep going for the longest of work days.

In testing I found you can get almost nine hours of constant use from the battery. If you take breaks away from the screen it should more than last all day.

As you’d expect the Elitebook x360 is small and light. Yet, at 1.25 kg it feels a shade heavier than it looks.

Build quality

Some of this heft is down to the build quality. The Elitebook x360 has a solid milled aluminium case. This computer feels like it is ready for you to carry it from place to place. I’d be a little concerned working on an industrial site, but it is more than robust enough for everyday business use.

It’s not the best-looking laptop, at least to my eyes, but it is far from embarassing.

HP describes it as the world’s smallest business convertible. That’s a specific claim and, to my knowledge it is true. At only 15mm deep, the Elitebook x360 is a fraction thicker than the MacBook, but Apple’s laptop doesn’t covert into a tablet.

The screen measures 13.3 inches across the diagonal. Resolution on the review model is 1920 by 1080 pixels, there is also a 3840 by 2160 version.

Privacy

The computer comes with Sureview: an integrated privacy filter. When you hit the F2 button, the viewing angles of the screen at reduced so that anyone looking at the display from over your shoulder or the next airplane seat can’t read anything.

HP says this kicks in at 40 degrees. That’s hard to check. Yet it works as promised. Sureview isn’t for everyone, but is ideal if you work on private reports in busy places.

On the downside, Sureview dims the screen and makes it harder to read. It makes colours duller. I struggled a little with it trying to read the display head-on if text was in anything other than black on white.

You wouldn’t want to have Sureview switched on all the time.

Keyboard

HP has gone for a decent quality backlit keyboard. I found it easy to type. There’s little flexing. Otherwise it’s not remarkable one way or the other. If anything it reminds me of the MacBook Air.

The up and down directional keys look squashed. In practice they are not a problem. The touchpad is a good size and responsive. It works better than I’ve seen on some rival Windows computers.

Beneath the keyboard is a tiny fingerprint reader for another layer of security. You can use this to log-in, but the Elitebook x360 does a great job with Windows Hello. Its face recognition was close to flawless during testing.

HP has simplified the ports on the 2018 Elitebook x360. You now get two USB-C ports. One of these is used for charging. There is also an HDMI and a Thunderbolt 3 port. There’s no Ethernet port, although that would make the case thicker.

HP EliteBook x360 verdict

Prices start at around NZ$2,800. That money gets you a model with an Intel Core i5 processor along with a graphics processor, 8 GB ram and 256 GB storage. That lessw expensive models support 1920×1080 graphics.

Pay around NZ$4000 and you’ll get a version with 16 GB ram, 512 GB storage and 3840×2160 pixel resolution. According to the HP web site, these prices include a three year warranty for all models. That alone is worth hundreds of dollars.

The HP EliteBook x360 is a good choice, but you can get a better deal.

If you’re not interested in the security features, then you might do better looking elsewhere. There are less expensive models in the HP range that almost match the x360 on features. You can expect more raw power, better graphics and longer battery life when spending the same amount money. But if you’d prefer to stay safe from prying eyes, the EliteBook x360 1030 G3 makes a lot of sense.

wellington cloud
wellington cloud

Four years ago Microsoft lost its mojo. The software giant had failed to compete in web search.

People questioned whether Microsoft was on an IBM-style path to irrelevance. When the phone business flopped, it looked like Microsoft’s time in the sun was over.

Today it is back. The 2017 Microsoft is a different beast, the main reason for its revival is a successful transition to selling cloud computing services. Microsoft’s birth isn’t yet on the same scale as Apple which came back with the iPhone, but that can still happen.

This week Microsoft reported quarterly profits that are more than twice the level of a year earlier.

It’s not all good news. Some of the jump was down to the company realising a tax benefit after writing off its failed mobile phone business.

Fast growing cloud transition

Yet that’s the past The important part of the quarterly announcement is that Microsoft’s cloud business is growing at a clip. That was enough to send the share price up three percent.

This wasn’t the first quarter where Microsoft’s cloud business was the star of the show. It’s been climbing for years now. In the latest quarter Intelligent Cloud revenue was up 11 percent to US$7.4 billion. Revenue for the company’s Azure cloud services was up almost 100 percent.

While Azure still trails behind Amazon Web Services, there is clear blue sky between Microsoft and the next set of cloud service providers. Being second in the most important market of the day is a huge win for Microsoft.

Azure profits

At the same time, cloud economics means it is close to a winner takes all game. Amazon and Azure share almost all the cloud profits.

The other cloudy good news from Microsoft is that revenue from the cloud version of Office 365 went past traditional software sales for the first time. There are now 90 million Office 365 users on iOS and Android. That is a big thumbs up for CEO Satya Nadella’s decision to support non-Microsoft operating systems.

Although Microsoft is doing a better job of transforming than rivals like IBM, Oracle or Google, it isn’t in the clear yet. Sales of Surface devices fell two percent during the quarter. Meanwhile enterprise service revenues fell. Yet it appears to be keeping pace with AWS, that’s something no-one else can manage.

Microsoft is cutting ‘several thousand’ employees, mostly in its sales organization, following a reorganization earlier this week.

Source: Microsoft to lay off ‘several thousand’ employees | ZDNet

Mary Jo Foley writes:

“One source close to the company said Microsoft would be cutting “several thousands” of employees. CNBC said Microsoft would be shedding up to 3,000 employees, but didn’t cite the source of that number.”

Microsoft has been here before. The company cut around 10 percent of its staff in 2014. That was mainly to do with the failed Nokia devices acquisition.

If the 3,000 number is correct, that’s around 2.5 percent of the employee total.

Sure, it’s a smaller number, but there’s a danger Microsoft is in a place where it has continuing rounds of redundancies. If you want to know how that story ends, look at IBM. The company never recovered once it started making big cuts to its staff numbers.

Cuts are not good for company moral. Employees constant wonder who is next. They become cautious, take fewer risks, play only the safest bets. This kills innovation culture.

Stressed survivours

Those left behind are often stressed. The more employable workers evaluate their prospects. Often, in technology companies the best, most valued employees — even the ones left after a round of cuts — decide they may be better off elsewhere anyway.

IBM’s cuts became a destructive vicious cycle that, eventually, undermined the company’s ability to innovate and serve its customers. They may have unleashed short-term value to shareholders, but the board ended up killing the golden goose.

Microsoft is not yet at that point. This is a trimming exercise. Most of the jobs that will go are in sales and the company is in transition to a new model where it will emphasis its Azure cloud computing over traditional product lines.

Yet, the jobs-cut-easy-fix can become an addictive and damaging habit. If it happens again in the next year or two, you can take it as read Microsoft is doomed to irrelevance.