Apple and Google Fight to Be Top Mapping App

Just a few years and several tech paradigms ago, Google (GOOG) and Apple (AAPL) were happy allies, and nothing demonstrated that better than their cooperation on digital maps. Since its 2007 launch, Apple’s iPhone has featured Google’s mapping software on its home screen, allowing iPhone owners to quickly find directions and see nearby terrain. Those days are over. On June 11 at the annual geek hajj known as Apple’s Worldwide Developers Conference, Apple Senior Vice President Scott Forstall announced a long-expected divorce: Google Maps has been ousted as a default app on the iPhone and iPad in favor of Apple’s home-cooked alternative.

The relationship has been challenged ever since Google’s Android operating system became the primary obstacle to the iPhone’s total planetary dominance. Maps are among the most popular apps on smartphones, and the location data they generate is essential for understanding and interacting with users—allowing companies to, say, send them ads for the nearest Starbucks (SBUX). Apple found itself uncomfortably dependent on a chief rival.

By 2008 the relationship hit new lows. Apple’s senior vice president for marketing, Phil Schiller, and Google’s senior vice president for engineering, Vic Gundotra, had fierce arguments that summer over which company owned the data coming from the iPhone’s Google Maps app, according to several people familiar with the incidents who were not authorized to speak on the record. Google continued investing in its own mapping technology, introducing features such as spoken, turn-by-turn directions, but that neat trick remained exclusive to Android—Apple either couldn’t or wouldn’t reach an agreement with Google to bring it to the iPhone. Apple “clearly didn’t want to be at the mercy of Google,” says Greg Sterling, a senior analyst at Opus Research. Both companies declined to comment.

Apple's maps offer beautiful helicopter-level city views - just like Google's

Apple’s new maps for the iPhone look remarkably like Google’s. There’s a satellite view similar to the one in Google Earth, real-time data on traffic, and voice navigation—an announcement met with thunderous applause by the several thousand Apple faithful at WWDC. After the event, Apple said its app’s data comes from the Dutch company TomTom (which makes personal navigation systems that are steadily losing market share to all-purpose devices such as the iPhone). Google will still make its mapping app available through Apple’s App Store, but it won’t be pre-installed on any new devices.

Google saw this coming. The search giant held its own mapping event on June 6 to announce a few new features. Google Maps will soon be available offline on Android phones, which means users can download portions of the cities they’re navigating to their phones so they won’t need a mobile connection to keep from getting lost. The company also announced an upgrade to the flyover feature of Google Earth. In place of the spare 3D images of the past, Google will soon introduce a crisp view that “really does create the illusion that you are flying over the city, almost as if you were in your own personal helicopter,” said Peter Birch, a product manager for Google Earth.

Google touted its fleet of airplanes, owned and operated by contractors, which fly in grid patterns over high-density areas taking photos of cities at varying angles. The company then uses technology that connects all those images into 3D models. Google also announced it was pushing into less-developed countries to photograph streets and map areas that are still largely blank. It showed off new camera-equipped backpacks and snowmobiles, which will help bring the eyes of its Street View service into rainforests and mountainous terrain.

Apple clearly has the money and competitive drive to match Google’s substantial investment. However this battle goes, as long these two keep butting heads, we’ll never have to ask for directions.

The bottom line: Apple’s mapping push represents a long-expected breakup with Google; the split is literally pushing the boundaries of digital maps.

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Time Warner Cable-MSG Fee Fight Knocks Knicks, Devils off Air

January 02, 2012, 7:15 PM EST By Alex Sherman and Jody Shenn

Jan. 2 (Bloomberg) -- Time Warner Cable Inc. subscribers won’t see today’s New York Knicks basketball and New Jersey Devils hockey games on Madison Square Garden Co.’s networks, a result of the programming-fee standoff between the companies.

Time Warner Cable’s 2.8 million MSG subscribers lost access to the channels after an agreement lapsed at 12 a.m. yesterday. MSG and Time Warner Cable are fighting over the rates the network is paid for allowing broadcast of its content.

The cable company told subscribers in a broadcast message yesterday that they could still watch some of the hometown teams’ games on other channels, while MSG Media President Mike Bair said that would be small consolation.

“Sports fans are passionate about their teams,” Bair said yesterday by e-mail. “They do not want some of the games, they want all of the games. They want comprehensive pre- and post- game shows and they want to watch MSG’s award-winning coverage of the Knicks and our other teams.”

The haggling over prices underscores the tension in the pay-TV industry over the cost of sports shows. If the dispute continues through this month, 15 of 17 Knicks games and 9 of 12 New York Rangers hockey contests will be affected, according to MSG.

Programs scheduled on the MSG or MSG Plus channels today include a game between the Knicks and Toronto Raptors at Madison Square Garden in New York and the Devils’ match with the Ottawa Senators, their website shows. Fans would miss a New York Islanders hockey game tomorrow and a Knicks-Charlotte Bobcats contest on Jan. 4.

‘Refused to Negotiate’

“We had a deal within reach earlier this year” offering a 6.5 percent rise in prices to MSG, Mike Angus, a Time Warner Cable senior vice president, said yesterday in an e-mailed statement. “MSG reneged on the deal and instead, demanded a whopping 53% increase and refused to negotiate further.”

Bair called Time Warner Cable’s claim that his company is seeking a 53 percent price increase a “gross mischaracterization.”

No progress in the negotiations was expected on New Year’s Day, Alex Dudley, a spokesman at New York-based Time Warner Cable, said yesterday in an e-mail.

MSG has urged the company’s customers to switch to Verizon Communications Inc.’s FiOS or DirecTV to get access to its networks.

MSG Co. is controlled by New York’s Dolan family, which also holds majority voting stakes in AMC Networks Inc., another cable programmer, and Cablevision Systems Corp. MSG Co. also owns the Madison Square Garden arena and Radio City Music Hall.

Cable Rates

Cable and satellite-TV operators pay more than $4.50 a month per subscriber for MSG and MSG Plus, according to researcher SNL Kagan. Walt Disney Co.’s ESPN, the most expensive cable network, charged an average of $4.69 a month in 2011 and will fetch $5.06 in 2012, Kagan said.

MSG’s rates have increased more than 70 percent over the past five years, according to Kagan. Time Warner Cable was willing to pay 6 percent more in 2012, according to Melinda Witmer, an executive vice president, who said MSG sought “dollars more” than any other sports network.

Time Warner Cable is betting few customers will cancel after losing Knicks and regional NHL games. The company said it would provide replacement programming, without being more specific.

Many Manhattan residents are unable to get satellite TV because tall buildings obstruct signals, and not all buildings are wired for FiOS or RCN Corp., a smaller cable provider that serves certain areas of New York City, according to David Joyce, an analyst at New York-based Miller Tabak & Co.

8 Million Subscribers

Counting other pay-TV systems, MSG network and MSG Plus have about 8 million subscribers, primarily in New York, New Jersey and Connecticut, according to a regulatory filing. MSG Co. also owns Fuse, which was a factor in the negotiations. Time Warner Cable dropped Fuse last month.

Heads of pay-TV services, including Time Warner Cable’s Glenn Britt, DirecTV’s Michael White and Dish Network Corp. Chairman Charlie Ergen have all lamented the role of sports in rising cable bills.

Time Warner Cable CEO Britt told the Wall Street Journal last month that sports networks should be sold separately from basic cable to lower bills for customers who don’t care about athletics. MSG and MSG Plus are part of the expanded basic package on Time Warner Cable, the second-largest U.S. cable service.

--Editors: Christine Maurus, Sylvia Wier

To contact the reporters on this story: Alex Sherman in New York at asherman6@bloomberg.net; Jody Shenn in New York at jshenn@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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Euro States to Funnel EU200 Billion to IMF in New Crisis Fight

December 09, 2011, 12:17 PM EST By James G. Neuger and Stephanie Bodoni

Dec. 9 (Bloomberg) -- European leaders stepped up the fight against the debt crisis, channeling as much as 200 billion euros ($267 billion) to the International Monetary Fund and bowing to European Central Bank demands for a tightening of anti-deficit rules.

In an accord hailed by ECB President Mario Draghi, the leaders also laid out a new “fiscal compact” to prevent future debt runups and accelerated the startup of a planned permanent 500 billion-euro rescue fund.

“It’s a very good outcome for euro-area members and it’s going to be the basis for a good fiscal compact and more disciplined economic policy in euro-area countries,” Draghi told reporters after 12 hours of overnight talks in Brussels.

European leaders navigated a labyrinth of political, legal and economic constraints amid unrelenting pressure from financial markets to craft the new approach to fighting the two- year-old crisis, which now threatens to engulf Italy and Spain.

At the same time, the leaders ventured into untested legal territory by plotting to anchor the tougher budget rules in a separate euro-area treaty after Britain and Hungary balked at amending the existing treaty covering all 27 EU countries.

--With assistance from Rebecca Christie, Tony Czuczka, Chiara Vasarri, Jonathan Stearns, Jurjen van de Pol and Gregory Viscusi in Brussels, Mark Deen in Marseille and Hans Nichols and Roger Runningen in Washington. Editors: Patrick G. Henry, John Fraher

To contact the reporters on this story: James G. Neuger in Brussels at jneuger@bloomberg.net; Stephanie Bodoni in Brussels at contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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Verizon May Ignite Online Pay-TV Fight

December 07, 2011, 7:45 AM EST By Scott Moritz

Dec. 6 (Bloomberg) -- Verizon Communications Inc., the second-largest U.S. telephone company, may set off competition among pay-television providers with a new Internet video service, said Janney Montgomery Scott LLC.

The service from Verizon, based in New York, could be a milestone because it would mark the first time a cable or other pay-TV provider moved to sell its content outside its regional footprint, said Tony Wible, a Janney analyst. The move may prompt cable operators, such as Comcast Corp. or Time Warner Cable Inc., to take similar steps, he said.

“We see this as a catalyst” for other companies, Wible wrote in a research note today.

Verizon is set to offer an online video service using Internet Protocol technology that will compete with Netflix Inc. and cable-television companies, Wible wrote. Verizon had 3.98 million customers for its FiOS TV service as of September.

Verizon hasn’t announced the online video service and Deidre Hart, a spokeswoman for the company, declined to comment. Reuters reported that Verizon would offer a service to compete with Netflix today, citing people briefed on the plan.

Verizon rose 0.7 percent to $38.32 at the close in New York and has gained 7.1 percent this year. Netflix fell 2.8 percent to $68.14 and has dropped 61 percent this year.

A move by Verizon into video may prompt cable and telephone companies to charge broadband customers based on the amount of data they use, what’s known in the industry as usage-based billing, Wible said. That would allow pay-TV providers to build up new revenue streams even if they lose customers for their television services, he said. It may hurt Netflix since its service would effectively become more expensive, he said.

Pay-TV providers that move quickly into each other’s territories could benefit, Wible said.

“The first movers may have an edge in the market,” he said.

--Editors: Peter Elstrom, Niamh Ring

To contact the reporter on this story: Scott Moritz in New York at smoritz6@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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SAP Embraces M&A to Fight Oracle in the Cloud

December 06, 2011, 4:59 AM EST By Ragnhild Kjetland and Aaron Ricadela

(Updates with SuccessFactors comment in sixth paragraph.)

Dec. 5 (Bloomberg) -- SAP AG’s then-chief Leo Apotheker told investors in 2009 that the German company’s homegrown technology was “significantly better” than that of Oracle Corp., which had “not done a good job with acquisitions.”

Apotheker was forced to leave three months later and his successors, co-CEOs Bill McDermott and Jim Hagemann Snabe, have already spent more than $9 billion on two major takeovers. The most recent came on Dec. 3, when SAP agreed to buy San Mateo, California-based SuccessFactors Inc. for $3.4 billion in cash to catch up with Oracle in the cloud-computing market.

McDermott and Snabe have changed tack at the largest maker of business-management software to do a better job meeting demand for new technologies, such as cloud computing, real-time analytics and mobile applications. The SuccessFactors deal shows SAP’s previous go-it-alone approach to the cloud was lacking, said Thomas Otter, a vice president at Gartner Inc.

“My first reaction was: What took you so long?” Otter said in a phone interview from Heidelberg, Germany, less than 50 miles away from SAP’s headquarters in Walldorf. “This means a fundamental shift in terms of their cloud strategy, which has been rather slow to get off the ground. This is a tacit admission that their cloud strategy was a failure.”

Short Investors

SuccessFactors rose 51 percent to $39.75 at the close in U.S. trading today. SAP shares, meanwhile, dropped 2.5 percent to 43.61 euros in Frankfurt, valuing the company at 53.5 billion euros. The stock has gained 14 percent this year.

The jump in SuccessFactors’ shares has made life difficult for people shorting the stock, or betting that it will go down, CEO Lars Dalgaard said today.

“The first thing I’m enjoying is how many shorts we fried,” Dalgaard said in an interview on “Bloomberg West.”

Investors increased short sales on SuccessFactors to 17.7 percent of shares outstanding as of Dec. 1, according to data compiled for Bloomberg by New York-based researcher Data Explorers. That was near the high of 18.3 percent on Nov. 24 -- a record going back at least to November 2007.

Still, the deal raises concerns for SAP, said Michael Briest, an analyst at UBS AG.

“In addition to the high price paid, which we think investors will see negatively, the other question will be whether the decision to acquire reflects a sign of SAP’s strength or its weakness,” he said. Briest cut his rating on SAP shares to “neutral” from “buy.”

Cloud Movement

SAP, Oracle and companies such as Apple Inc., Salesforce.com Inc., International Business Machines Corp., Amazon.com Inc., Dell Inc. and Microsoft Corp. are promoting cloud computing as a secure way to outsource data centers and reduce the need for pricey servers and other hardware.

SuccessFactors, which makes software used to manage employee performance, has more than 3,500 customers and 15 million subscribers in 168 countries. The company is predicted to have $502 million in revenue in 2013, up from $332 million this year, according to analyst estimates compiled by Bloomberg.

The purchase could add another 1 billion euros ($1.34 billion) to SAP’s 2015 sales target of 20 billion euros, co-CEO McDermott said in a telephone interview.

SAP is paying eight times SuccessFactors’ forecast revenue for next year, compared with a median of three times revenue companies paid for 32 North American software targets over the past five years, Bloomberg data show. It is paying a premium of 54 percent, based on a 20-day average of the target’s share price, compared with a 22 percent premium Oracle paid for cloud competitor RightNow Technologies Inc. on Oct. 24.

‘Crown Jewel’

“You get what you pay for and if you want the crown jewel in this industry, you have got to pay for it,” McDermott said. “We are very comfortable with the relationship between the price and 2012 revenues. It’s very much in the medium range. We don’t consolidate old tired companies that don’t grow anymore.”

SAP may take a break from large deals following the close of SuccessFactors, while it concentrates on expanding in cloud computing, mobile business software, data analysis and in-memory computing, McDermott added.

“For now, I think we have the assets we need to win,” he said.

McDermott and Dalgaard first met on Sept. 27 at SuccessFactors’ suburban office in San Mateo, the executives said. McDermott said he “personally” evaluated a number of cloud computing competitors -- including having dinners with their executives -- before deciding to buy SuccessFactors. Competing with Oracle wasn’t a driving factor in the deal, he said. One asset SAP gains is Dalgaard himself.

Software as a Service

Dalgaard, 44, will have the job of overseeing SAP’s broad software-as-a-service efforts, including its Business ByDesign Web programs for midsized companies. Peter Lorenz, an SAP executive vice president in charge of the group of products, will report to him, McDermott said.

“Lars will oversee the entire SAP cloud,” McDermott said. “This is our catalyst.”

Owning SuccessFactors, which helps companies decide which employees to retain and how much to pay them, can help SAP sell “human capital management” software to the highest echelons of its customers’ management, McDermott said. SuccessFactors may also add programs for handling logistics and supply-chain operations, Dalgaard said.

Termination Charge

There will be a termination fee of $112.5 million in certain circumstances if the deal falls through, SuccessFactors said today.

“The talent management market will probably be worth about $3.5 billion this year,” Otter said. “SAP has essentially spent what the whole market will be worth this year in one swoop. It is a lot to pay for a niche in their portfolio, but human resources technology is a hot space.”

The global market for cloud services may surge to $148.8 billion in 2014 from $68.3 billion in 2010, Gartner estimates.

Brendan Barnicle, an analyst at Pacific Crest Securities in Portland, Oregon, said SAP may need to make more cloud acquisitions.

“They’ve now got a very good basis here, but I would expect them to make smaller acquisitions in cloud to complement this,” he said in an interview. “Maybe they’d look at someone in expense management, like Concur Technologies Inc., or in procurement, like Ariba Inc.”

Ariba gained 14 percent in U.S. trading today, while Concur climbed 11 percent.

Oracle’s Acquisitions

While Oracle has spent more than $42 billion on takeovers since the beginning of 2005, SAP had only made only two large acquisitions in its 39-year history before SuccessFactors: Sybase, a maker of mobile-device applications, for $5.8 billion in May of last year, and business-intelligence company Business Objects for 4.8 billion euros in 2007.

“They need to make acquisitions,” Ray Wang, head of San Francisco-based Constellation Research, a research and advisory firm focused on technology, said in an interview. “Innovation now happens at startups and SuccessFactors is a lot like a startup.”

SAP has added three categories since May 2010: mobile- computing software; Hana real-time analytics technology; and software that can be accessed over the Internet. Hana and mobile made up 10 percent of third-quarter sales, Snabe said on Nov. 17, adding that SAP aims to add product categories to accelerate sales growth.

‘M&A Factory’

Siemens AG, Exxon Mobil Corp. and Wal-Mart Stores Inc. are among more than 176,000 companies that use SAP’s applications to order goods, plan inventory levels and manage sales. The company is trying to sell them mobile software gained through the Sybase acquisition and the Hana software, which lets companies analyze data in a computer’s memory instead of through slower disk drives.

SAP, the largest maker of business-management software, has more than 20 people dedicated to integrating acquired companies in the information-technology department, Chief Information Officer Oliver Bussmann said.

“We have an M&A factory at SAP,” he said in an interview in San Francisco on Nov. 30.

Gartner’s Otter says SAP’s more aggressive M&A strategy may spark a reaction from its U.S. archrival.

“Oracle took the first move with the acquisition of RightNow and SAP needed to respond,” he said. “Given Oracle’s propensity to acquire, this is going to heat things up.”

--With assistance from Matthew Campbell in Paris; Sylvia Wier in New York; and Danielle Kucera, Cory Johnson and Rachael King in San Francisco. Editors: Simon Thiel, Tom Giles

To contact the reporters on this story: Ragnhild Kjetland in Frankfurt at rkjetland@bloomberg.net; Aaron Ricadela in San Francisco at aricadela@bloomberg.net

To contact the editors responsible for this story: Tom Giles at tgiles5@bloomberg.net; Simon Thiel at sthiel1@bloomberg.net

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