There are in fact thousands of OS nowadays. For smart phones market there are only a few due to the complexity. Certain markets such as automotive also have their own RTOS with special requirements. I believe there are always room to grow for the OS market.
Actually if you look at valuation multiples of acquisitions, they have dropped quite a bit in the last two years as the economic recovery has stagnated. This is across all the high-tech sectors that I track (meaning sellers of companies), ranging from semiconductors to engineering design services, security software, software development tools, and of course operating systems software. I track the multiples in about a dozen of these segements on a quarterly basis. Anyone who wants to be put on our newsletter list just email me. blorenz@mcleanllc.com.
Specifically, if you look at just Operating Systems Software acquisitions (as sellers), you get:
Year EV/Revenue
2010 9.49 (61 deals)
2011 1.59 (50 deals)
1Q12 0.92 (13 deals)
2Q12 2.33 (18 deals)
While this is a disturbing trend for any owner of a company hoping to sell, as long as our government can keep us out of recession in 2013 by avoiding the fiscal cliff, I think valuations will recover next year, although maybe not back to 2010 levels right away.
(Note, EV/Revenue means Enterprise Value / Revenue multiple. Basically it means that the company sold at X times trailing annual revenue.)
Brent, It is possible for M&A activities to revive in the markets you addressed. One potential roadblock is the high valuation many public companies now have on the equity markets. Sales aren't sky high but companies are so loaded with cash and have such high productivity that valuations have been on an upward swing. Could this hurt mergers and acquisition potentials in the OS market?
Bringing in an embedded OS company can be particularly thorny for the company making the acquisition. There's much higher due diligence required than in most acquisitions, since the OS technology is generally outside the acquiring company's core expertise.
When IBM developed one of the first PC's, they outsourced the OS to a start-up called Microsoft. Apple's early integration of graphics into their hardware allowed them to surpass MS by many benchmarks, but the case could be made that OS and h/w managed by separate entities worked out better for the computing industry.
@nimantha.d, what do you mean by competing with big names? I would say this ISV guys are a very minor startups or just 2 or 3 geeks who have been sitting in the dark rooms of their houses tinkering with OS embedded applications until some venture capitalists snapped them up.
This is not surprising, OS embedded market would set to grow higher. There are lot of reasons to boost this sector in very near future. Am wondering Mentor Graphics not featured among the list of OS embedded firms.
My heart says Yes to this becasue they have the capability but the only issue is that do they have the correct plus enough resources to compete with the big names as their competitors ? This is where the difference might lye.
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Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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