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July 25, 2011
Volume XXXV, Issue 12

Cloud Computing Catching On in Emerging Markets 

Excerpted from ReadWrite Cloud Report by Klint Finley

While cloud computing gains steadily in the US, UK, and Germany (and rather slowly in Canada), it's taking off in emerging markets like Brazil, China, and India.

According to a study by GfK Custom Research, and covered by FineChannel, cloud computing enjoys relatively high penetration rate in emerging markets, regardless of company size.

According to GfK, decision makers in Brazil, China and India have a much more positive view of cloud computing and cite cost-effectiveness, flexibility, and security as the main benefits.

In contrast, decision makers in the US and the UK see security as a barrier rather than a strength, and view flexibility as the main advantage.

But FineChannel notes that data security is seen as a benefit by many in established markets as well. This fits with the BitNami, Cloud.com and Zenoss survey we looked at recently, which found that security is perceived as both a benefit and a risk by many technology decision makers.

In addition to security, cost, including migration and subscription rates, is often seen as a barrier to adoption. The cost of cloud services was named by 42% as a top reservation. Other concerns include availability and dependence on outside parties.

Decision makers in emerging markets were more trusting of global cloud providers like Amazon Web Services, Google, and Microsoft than of domestic options. Microsoft was the most trusted name.

OTT Set to Go Over the Top, Gorge on Bandwidth

Excerpted from VidBlog Report by Steve Smith

For the time being, game consoles are the undisputed king of the hill when it comes to providing over-the-top (OTT) video services to the living room. But within the next few years look for Internet capable TVs and Blu-ray disc players to supplant the aging Xbox360s and Playstation3s as the preeminent connected sources of IP content to the TV.

In a new report from IMS Research, the company predicts that access to IP video content to the living room will accelerate rapidly as "all but the lowest-end" TVs and disc players will carry network capabilities. In terms of raw bandwidth, the use per household of Internet video into the living room will increase by more than 50%, IMS foresees.

The leading revenue model for OTT will be subscription services rather than pay-per-view and purchase models. Subscriptions will accrue $32 billion worldwide over the next five years, IMS estimates.

The hockey-stick growth in OTT access is going to create a problem for IPTV providers like telcos as the demand for bandwidth starts to challenge existing compression technologies. The problem will come in handling peak usage periods.

In France, for instance, bandwidth demand over IPTV systems at peak demand in 2010 still amounted to only 37% of network capacity. By 2015, IMS finds that peak demand share of overall bandwidth will increase 60%.

"In a country with a pronounced OTT content demand like the United States," the report states, "average data usage by an IPTV household will rise to nearly 25Mbps in 2015, up from the current 19Mbps.

While the increase may not seem significant, IPTV households are expected to double, creating a need to address possible congestion issues." The telcos serving IPTV are out looking for technology solutions to maximize bandwidth. According to IMS analyst John Kendall, "OTT is here to stay, and the telcos have accepted that."

The next question for all MSOs and for consumers will be whether that increase in bandwidth investment will be underwritten by increased Internet access fees and tiered pricing.

Report from CEO Marty Lafferty

Photo of CEO Marty LaffertyWe are pleased to announce that the DCIA has been invited to present a CONTENT IN THE CLOUD (CITC) session at the Streaming Media West (SMW) conference taking place November 7th-9th in Los Angeles, CA.

SMW will cover the entire online video ecosystem, from content creation and management to monetization and distribution.

Attended by more than 2,500 executives last year, the SMW show is the number-one place to see, learn, and discuss what is taking place with all forms of online video business models and technology.

Content owners, viral video creators, online marketers, enterprise corporations, broadcast professionals, ad agencies, educators, and others attend SMW to see and hear the latest online video technology but, more importantly, to discuss the business models that are coming of age.

With more than 100 speakers and 30 sessions, SMW is the one online video show that is solely focused on providing real information you can apply immediately in your business. At SMW, nearly 75% of the speakers are customers who are buying and deploying these services and products today.

SMW began its general speaker placement this week, and we would like to encourage DCINFO readers interested in speaking on CITC at SMW to contact us directly (410-476-7965 or marty@dcia.info) at your earliest convenience. We are particularly interested in content rights holder customers of cloud solutions providers. We have lined-up several prospective speakers already and would like to finalize panelists within the next two weeks.

CITC at SMW follows our standing room only (SRO) 2011 CONTENT IN THE CLOUD sessions this year at the Consumer Electronics Show (CES), National Association of Broadcasters (NAB) Show, and Digital Media Conference (DMC).

Below are other confirmed sessions at this fall's SMW that promise to be of particular interest to distributed computing industry participants.

The Impact Of Carrier Based CDNs On Video Delivery - This panel will discuss the CDN plans and implementations of major North American carriers for delivering video to the last-mile. Topics will include the technologies, economics and product offerings that make carrier CDNs compelling and how they may disrupt the traditional CDN model. Panelists will provide updates on their companies' strategies, perspective on the market and unique relationships their companies can forge with content owners and other partners.

Cutting The Cord On TV: Will Online Video Really Lead To Cable's Demise? - From Hulu to Netflix, streaming video is having a powerful impact on the traditional television industry. But are consumers really cutting the cord and bypassing cable operators in favor of online video? With the broadcast networks facing some of the same threats as the newspaper industry, will services like TV Everywhere and over-the-top (OTT) content be the industry's savior? These topics and more will be addressed by this panel of content heavyweights.

How the Cable Industry is Changing the way Video is Delivered - Cable operators are pursuing a new market-based approach to enable IP delivery of cable TV services to consumer owned equipment. This session will explain the benefits for subscribers and CE equipment manufacturers of new IP-based, in-home cable services and how market-based solutions are providing cable content directly to an expanding range of consumer owned equipment. Learn the role standards organizations play in the development of these platforms and the key technologies used to enable both the hybrid tru2way and direct IP solutions.

Cloud Demos: Amazon CloudFront and Windows Azure - With no up-front expenses and no long-term commitment, both Amazon's CloudFront platform and Microsoft's Windows Azure platform enable you to pay only for the resources you use, and it's simple to configure both of them within minutes to store and deliver your content and applications. In this session, you'll see how they both work and learn how to use them.

Data vs. Content: Who's the Real Star of Online Video? - The rise of online video has opened up a world of metrics and audience data that can help us understand consumers' interests in a way that has not been possible before. At the same time, the growth of online content consumption drives investment in premium content to satisfy the demand. In this session, speakers will discuss what makes up good inventory-whether prioritizing audience data crunching or investing in high-quality, premium content will create the most engagement and return on investment. Ad networks and content platforms will debate which of these two approaches will prove the best for monetizing the boom in online video.

Best Practices for Live Streaming - Producers are taking advantage of new technologies, workflows, and production methods to create successful live events. This session will discuss the entire webcasting workflow, including how to get the video signal from the site to end user; how to build an audience; when to use multi-bit rate streaming; strategies to consider for reaching mobile devices, and how to leverage social media platforms. Presenters on this session are the ones in the trenches, producing some of the live events you see on the web today.

Connected Device Demos -As the number of broadband-enabled devices and platforms invading the living room continues to grow, lots of questions remain about their capabilities. In this session, company executives from some of the leading device companies will demo their latest TV platforms and devices. Attendees will see these devices and platforms in action, learn which content is available on them, and get their questions answered in a Q&A session.

How To: Encoding For Adaptive Streaming - This seminar identifies the most relevant adaptive streaming technologies and details the most critical factors for comparing them. Next, the seminar details how to choose the ideal number of streams and key encoding parameters. Then it provides an overview of options for encoding and serving the streams, and closes by describing techniques for serving multiple target platforms like Flash and iDevices with one set of encoded H.264 files.

Simplifying the Multi-Format Video Workflow - A variety of streaming formats-Silverlight, Flash, HLS, WebM-is generally required to serve the multitude of screens through which content is consumed. Each format can include separate workflows, storage components, and strategies. Network-based media processing offers an increasingly popular approach to simplifying these workflows. How does packaging of media elements in the network (versus on the encoder) work? What are the benefits? What additional features are possible with network packaging (DRM, CAS, ad insertion)? Does this approach work for both small and large operations? In this session, we'll answer these questions and hear various approaches to this new workflow methodology.

Google TV Demo: The New World of Smart TVs - Like the smart phone before it, the smart TV will bring a new layer of functionality to your existing home entertainment experiences. In this session, executives from Google will examine the value the web will bring to TV, the opportunities for content providers and developers, and the common myths and misperceptions around smart TV. Attendees will also see an overview of Google TV, including the latest developments on the platform, the killer apps, and what lies ahead.

Please get in touch soon if you're interested in participating in CONTENT IN THE CLOUD at Streaming Media West as a speaker: 410-476-7965 or marty@dcia.info. Share wisely, and take care.

EFF Joins ECA and DCIA in Opposition of Bill S. 978

Excerpted from GamePolitics Report

The Electronic Frontier Foundation (EFF) has joined the Entertainment Consumer Association (ECA) and the DCIA in opposing the bill S. 978, also known as the anti-streaming bill being fast tracked through the US Congress.

The advocacy group issued an alert urging the public to oppose the bill, which it called a "reckless attempt to attack online streaming by focusing on the 'unlawful public performance' area of copyright law." Much like the ECA's letter campaign, the EFF is offering a way for the community to send a strong letter to their elected officials. More from the alert:

"S. 978 is a reckless attempt to attack online streaming by focusing on the "unlawful public performance" area of copyright law. By increasing the criminal penalties for certain online public performances, the bill will impose a chilling effect around the posting and creation of online video. Moreover, it will hamper the pace of innovation as users, websites, and investors cope with the uncertainty of running afoul of one of the more vague sections of copyright law. Act now and tell your Senators to oppose this shortsighted bill! Under certain conditions, an "unlawful public performance" of a copyrighted work is already a crime. But this bill targets online streaming in an effort to give the government more enforcement power to bear-particularly against websites that the entertainment industry believes to be threatening. There have been few court decisions regarding public performance online. That means that if this bill passes, it's hard to predict whom the government will target. Government agents may choose to go after individual users, or entire websites and video platforms. Given the history of the government's approach to copyright enforcement, the government may well wind up taking cues from trigger-happy copyright holders. The attempt to expand criminal penalties for online streaming also reeks of a means to stock the arsenal of Immigration and Customs Enforcement (ICE) in performing more wild seizures of domain names. Bills like S. 978 are the "inch" from which the government and rights-holder industry will take a "mile" out of freedom and innovation on the Internet. S. 978 was recently approved by the Senate Committee on the Judiciary to be considered by the entire Senate, so your action is urgently needed. Contact your Senators now to let them know to OPPOSE this bill!"

You can participate here.

Gaikai Raises $30 Million for Cloud Gaming Network

Excerpted from Digital Media Wire Report by Chris Marlowe Chris Marlowe

Cloud-based game service Gaikai this week announced it has raised $30 million toward rolling out its network for interactive, real-time gaming, compatible with nearly every device.

The funding was a Series C round led by venture capital firm NEA, with Qualcomm, Benchmark Capital, Rustic Canyon and Intel Capital participating. Gaikai will use the funds to accelerate the growth and adoption of its network.

David Perry, CEO of Gaikai, said the Gaikai Global Interactive Network will eliminate existing problems caused by incompatible devices and geographic and territorial boundaries.

Additionally, users will be able to play console-quality games on any device and from anyplace they happen to be, even inside platforms like Facebook. Electronic Arts and Wal-Mart are already confirmed partners in the venture.

"We have all become used to accessing every song ever made, every book ever written, every movie in every genre through cloud-based services," Perry said. "Gaikai is bringing this same functionality to video games and other interactive software."

The company intends to operate and manage public and private cloud platforms as a service, so that its partners can quickly launch their own cloud-based services.

Digital Expansion: Amazon Streams CBS

Excerpted from Media Daily News by Wayne Friedman

Keeping with TV networks' efforts to spread around its content to different digital video distributors, CBS and Amazon this week announced a non-exclusive licensing agreement.

The deal will allow Amazon Prime customers to stream an additional 2,000 episodes of CBS TV shows - now totaling 8,000 TV episodes and movies. Terms of the CBS-Amazon deal were not disclosed.

Some 18 shows from CBS' library are part of the Amazon agreement. This includes: "The Tudors," which aired on Showtime; CBS' "Numb3rs" and "Medium"; the complete Star Trek franchise; and "Frasier" and "Cheers," both of which aired on NBC.

In February, CBS also made similar library deal with Netflix under a two-year pact. Reports suggest that deal to be worth $200 million.

Recently, Netflix added to its coffers with a renewal for nonexclusive TV and theatrical movie content from NBC Universal. One analyst suggested that deal gives NBC $300 million per year from Netflix - a significant rise from $25 million per year it had been getting from the digital video service.

In December 2010, Netflix inked a one-year deal with Walt Disney and ABC valued at around $150 million to $200 million. While that deal included library product, it also included more recent episodes of shows such as ABC's "Grey's Anatomy" and "Brothers & Sisters."

"Amazon has created one of the most popular consumer marketplaces in the world, and we are very pleased to make these titles available to their Instant Video and Prime customers," stated Leslie Moonves, President/CEO for CBS Corp. "This new agreement represents another meaningful way for us to realize incremental value for CBS' content."

Amazon Instant Video is a streaming video service with 90,000 movies and television shows available to purchase or rent. This service includes commercials; with individual shows priced as low as $1.99 an episode. Amazon Prime, a $79-a-year service, is commercial-free.

Connected TVs Will Crush Set-Top Boxes

Excerpted from Streaming Media Report by Troy Dreier

While some are busy comparing the merits of the various set-top boxes (STBs), the long view is that the television itself will take over online streaming, and that STBs will simply go away.

"What we think of as over-the-top boxes right now - Roku, Boxee, etc. - will probably not be around in five years. Those are kind of just a stop-gap measure until the TVs, the Blu-ray devices, potentially even cable boxes, have the app platforms built in, because why would you buy the standalone box when your TV already does it?" asked Justin Eckhouse, Senior Product Manager for CNET/CBS Interactive.

Eckhouse was speaking at a red carpet interview during the recent Streaming Media East (SME) conference in New York City. While the boxes will go away, Eckhouse sees a big future for over-the-top delivery - thanks to connected TVs.

"I think this year and next year are really going to be big for over-the-top, because before you had people like Roku and Apple TV selling stuff, but they're selling like, Roku I think has sold one million and Apple TV has sold two million. That's not very many in the scheme of things. Tablets, they're supposed to sell 60 million this year," Eckhouse said. "But now you have TV providers coming up with really compelling platforms."

To view the entire interview, including an insider's look at the economics of over-the-top delivery, click here.

Cord-Cutting on Rise, 10% of Homes By 2015

Excerpted from Media Daily News by David Goetzl

A new report estimates about 4.5 million, or 4%, of US homes will have only over-the-top (OTT) delivery of video service by the end of this year. That figure, according to SNL Kagan, is projected to rise to 12.1 million over the ensuing four years, which would be about 10% of homes.

They would rely on Netflix and Amazon for content.

Kagan says OTT consumers "impacted the subscriber counts for multichannel service providers in 2010." They are expected to "exert competitive pressure going forward."

Executives at cable providers say there is scant evidence of cord-cutting, and reductions in subscriber rolls are due more to factors such as the economy or slowed household formations.

In 2010, the second and third quarters marked the first declines in subscribers with a multichannel subscription, but the figure did increase for the full year.

Kagan estimates that about 85% of homes had a subscription at the end of 2010. (The figure counts homes with multiple subscriptions just once.)

OpenStack's First Birthday: A Year in Review

Excerpted from Huffington Post Report by Arnal Dayaratna

OpenStack, the open source cloud computing project initiated by NASA and Rackspace, celebrated its first birthday this week. OpenStack's open source code enables customers to create public or private cloud environments that deliver functionality analogous to that provided by private Infrastructure as a Service (IaaS) vendors such as Amazon Web Services (AWS), Joyent or Verizon Terremark.

The OpenStack project began with the support of 25 companies but has grown significantly over the last year to the point where it now claims the backing of 80 companies that collectively offer financial and technical support to a staff of 217 developers. Current contributors include AMD, Canonical, Cisco, Dell, Intel and Citrix and start-ups such as Piston Cloud Computing and Nephoscale.

OpenStack's offering currently contains three components: (1) OpenStack Compute, which allows customers to create and manage a hypervisor agnostic cloud computing platform featuring a network of virtual machines; (2) OpenStack Object Storage, for storing petabytes of data; and (3) OpenStack Image Service, to take, store and provide copies of virtual running machines. The core of OpenStack's offering, OpenStack Compute, allows customers to create an IaaS cloud environment using code that has been maintained under an Apache license.

Key OpenStack milestones during the last year include the following:

March 30, 2011: Rackspace, Dell and Equinix announce plans to launch an OpenStack demo environment intended to entice customers to investigate OpenStack's cloud computing products.

May 10, 2011: Canonical's decision that the 11.10 version of its Ubuntu Enterprise Cloud woud be based on OpenStack instead of Eucalyptus.

May 25, 2011: Citrix reveals plans to deploy Project Olympus, the first commercialized version of OpenStack.

July 12, 2011: Citrix acquires Cloud.com, and promises to build APIs between Cloud.com's CloudStack platform and OpenStack.

Dubbed the Android of the cloud computing market, OpenStack promises to radically transform the cloud computing landscape by shifting market share from private cloud vendors such as Amazon Web Services and Verizon Terremark to an open source cloud operating system. The first year witnessed explosive development of OpenStack's code, including three code releases named Austin, Bexar and Cactus, respectively.

The fourth release, Diablo, is scheduled for distribution on September 22nd. OpenStack's first year also witnessed notable deployments by Internap, Korea Telecom and Piston Cloud Computing.

In its second year, OpenStack aims to build upon its development progress by inaugurating more deployments in addition to rolling out new functionality such as networking support and identity management. If OpenStack continues to grow at a rate that comes anything close to what it displayed in its first year, expect it to leave an even larger footprint in the cloud computing space by the time of its second birthday in July 2012.

SUBWAY Heads Down the Cloud Computing Highway 

Excerpted from Datamation Report by Jeffrey Kaplan

As the Software-as-a-Service (SaaS) and public cloud services industries mature they are being deployed to play more pivotal roles in the day-to-day operations of bigger and bigger organizations. The latest example is Coupa Software's recent contract with the Independent Purchasing Cooperative (IPC) of SUBWAY, the largest franchise company in the world.

Under this agreement, Coupa's cloud spend management solution will be deployed across approximately 35,000 restaurants and 60,000 end-users in 98 countries, making it the largest, multi-location cloud business application deployment to date. In addition, SUBWAY's IPC will utilize public cloud services delivered by Amazon Web Services (AWS) to house its procurement data, invoice records, and other critical information essential for running its day-to-day operations.

This contract clearly shows how a growing number of 'mainstream' companies of all sizes are employing SaaS solutions and public cloud services to redesign the way they operate to meet the rapidly changing needs of their customers and employees in an increasingly competitive marketplace.

This isn't the first win for Coupa in the fast-food industry. It is also supporting the spend management needs of the second largest Quick Service Restaurant (QSR) which it can't name but we all know by its iconic arches.

Under the SUBWAY IPC agreement, franchisees will purchase all products related to their SUBWAY restaurants through Coupa, including meats, produce, chips, drinks, cleaning supplies, and uniforms. In order to facilitate this centralized purchasing process, Coupa is integrating its cloud-based solution with the world's leading food distributors, such as Sysco and US Foods. The integrated systems will funnel the following documents across the franchise network:

It will also manage the ordering processes, delivery schedules, order cutoff times, returns, credits, etc. Coupa is also working with the SUBWAY's IPC to permit its end-users to utilize their mobile devices-tablets and smart-phones- to place orders and check their records from any location inside their franchises or elsewhere.

When the network is fully deployed, it will handle 30,000-60,000 purchase orders a week, and thousands in minutes. It will also integrate with the IPC's existing EDI network. Coupa and AWS are promising 99.9% and higher uptime guarantees to minimize the risk of any extended service disruption which can result in a lost revenue for the franchisees.

In addition to the scalability and rapid deployment of the Coupa solution, SUBWAY's IPC also chose the Cloud-based system because of its intuitive user-interface, which its highly diverse population of workers can adopt easily and quickly with minimal training.

Coupa's free Supplier Network will also enable the food industry vendors to use different file formats, processing schedules, and create receipts in Coupa when the goods are received. The receipt information will flow into their POS system to update on-hand inventory. This will permit the franchisees to create orders directly from their POS systems based on an algorithm that evaluates the on-hand quantity of material and the projected consumption for the week, information analyzed by the Coupa solution using data stored in the AWS public cloud.

So, the next time someone tells you that companies can't rely on SaaS solutions and public cloud services to run their businesses and handle their mission critical data, take them out to lunch at SUBWAY.

Riverbed Buys UK Cloud Company Zeus for $140 Million

Excerpted from Financial Times Report by Maija Palmer

Riverbed Technology, the US IT services company, on Wednesday announced a deal to buy Zeus, a UK cloud computing company, for $140 million in cash.

It is the latest in a series of acquisitions of companies providing tools for cloud computing, or hosting and handling data remotely over the Internet. Cloud computing is one of the fastest-growing areas of technology and many IT services companies are keen to move into it.

Earlier this month Citrix, the US networking company, paid more than $200 million for Cloud.com, a three-year-old California-based start-up in this sector. Big US tech companies have spent more than $2.6 billion buying cloud technology companies over the past two years. The Zeus deal is one of the first signs of the cloud acquisition frenzy moving into the UK.

Riverbed also announced another, smaller deal to buy Aptimize, a New Zealand-based internet content management company, as part of a strategy to build up an arsenal of cloud computing tools.

Cambridge-based Zeus manages cloud computing traffic for 1,500 big companies including BT Group and the BBC, to ensure their data centers do not become swamped at busy times.

Riverbed will pay $110 million to Zeus on closing the deal, with a further $30 million dependent on the company reaching certain targets. It is understood the price is more than 10 times Zeus' annual revenues. Cloud-related deals in the past year have often been priced at 10 to 20 times revenues.

Zeus was backed by venture capitalists DFJ Esprit and Scottish Equity Partners, and was advised by Arma Partners on the deal.

IBM's Growth Fueled by Cloud Computing

Excerpted from TheStreet Report by Chris Stuart

Analysts are expecting the global technology firm to report earnings per share of $3.03, compared with $2.61 a year earlier. Revenue is estimated to increase 7% to $25.4 billion from $23.7 billion due to improved demand within its systems technology segment. Growth in IBM's cloud offerings are also providing a source of growth, as management has noted that cloud related revenue is expected to double in 2011.

The following is taken from a first-quarter report published by TheStreet Ratings, an independent-research unit of TheStreet that uses a quantitative model to evaluate stocks.

IBM improved earnings per share by 17.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, IBM increased its bottom line by earning $11.58 versus $10.01 in the prior year. This year, the market expects an improvement in earnings ($13.20 versus $11.58).

We rate IBM a "buy." This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. Our model maintains a price target of $228 on shares of IBM, indicating the potential for 30% upside from current levels.

The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, revenue growth, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the IT Services industry and the overall market, IBM's return on equity significantly exceeds that of both the industry average and the S&P 500.

Acer to Buy US Cloud Computing Firm iGware

Excerpted from Reuters Report by Clare Jim and Argin Chang

Taiwan's Acer will buy US-based cloud computing firm iGware for $320 million, the fifth-largest ever Taiwanese buyout of a US company, as it seeks to move beyond its core hardware manufacturing business.

The world's No.2 PC maker said it was also in initial talks with Japanese game firm Nintendo, a major client of iGware, over potential cooperation after the deal, but did not give details.

Acer has been refocusing on mobile devices to drive future growth after a troubled first half that saw the acrimonious departure of its chief executive after a row over the company's strategy and a series of cuts to its shipment forecasts.

The company has been a dominant force in the PC business, particularly in the low-cost notebook segment, but has failed to counter the runaway success of tablets such as Apple's hot-selling iPad, that have cut into PC sales and hurt profits.

"This acquisition is the right direction for Acer," said Tracy Tsai, an analyst at IT research company Gartner.

"Companies can no longer rely only on hardware; they have to bring new values to customers through providing applications and software services, and by that to increase their margin."

Acer opened a new global R&D center in Chongqing, China, on Monday to enhance development of smart-phones and tablet PCs.

Acer will also make a further $75 million performance-based payout to iGware as part of the deal.

The total $395 million makes the deal the largest Taiwanese buyout of a US company this year, according to Thomson Reuters data.

The largest such deal on record was Acer's purchase of US PC maker Gateway for $761.5 million in 2007.

At a separate media briefing, Chairman J.T. Wang said the company will report a loss in the second quarter before returning to profit in the third and post a small full-year profit.

"Acer was in intensive care unit (ICU) but it has been discharged now. It will be more comfortable in the fourth quarter and return back to normal next year," said Wang.

Analysts have cut their net income estimate for Acer by 13% over the past 30 days and now expect the company to report mean net income of T$5.33 billion for the year to December 2011, down 65% from a year ago.

As of Wednesday's closing price, Acer shares had fallen 56% so far this year in a broader market down nearly 3%, while Asustek has gained 6.5% and Quanta is up 13.4%.

Wang said Nintendo is supportive of the deal and will pay Acer a $20-30 million service fee every year after the acquisition.

Nintendo spokeswoman in Tokyo Yuka Tanegashima declined to comment on whether Nintendo was a client of iGware. She said she was not aware of any talks with Acer.

Some analysts were skeptical about the synergy iGware or Nintendo would bring to Acer.

"Acer is wasting its money. It's spending almost $400 million on a small software company," said Vincent Chen of Yuanta Securities.

"Why does it need a client like Nintendo, which doesn't have a cloud or data center? Acer has been wanting to do online gaming and server business, but it doesn't have a clear vision in the cloud business."

Acer said, "As a mid- to long-term investment objective, the valuable core technology and capabilities will help create uniqueness for the Acer brand."

Acer will start integrating iGware into its cloud software and platform after completion of the deal by late September, and will launch an Acer Cloud product some time in 2012.

The acquisition will not add to short-term profit, the company said.

Silicon Valley based iGware offers cloud software and infrastructure tools that support more than 100 million consumer devices worldwide, including Nintendo game consoles.

Cloud computing refers to users of computers, smart-phones and other devices accessing programs and files kept on server computers rather than installed on individual PCs.

The concept is gaining attention as PC makers contemplate making PCs and other linked devices portals to information and content stored elsewhere, lowering costs for their customers.

Cloud Computing Can Save $12 Billion

Excerpted from Environmental Leader Report

Cloud computing has the potential to save large US companies up to $12.3 billion a year and to prevent 85.7 million metric tons of annual carbon emissions by 2020, according to a report by the Carbon Disclosure Project.

According to the report, Cloud Computing: The IT Solution for the 21st Century, cloud computing can also achieve significant non-monetary benefits, such as business process efficiency and increased organizational flexibility. The report, conducted by independent analyst research firm Verdantix and sponsored by AT&T, analyzes the potential impact of cloud computing at firms with revenues of more than $1 billion.

For the report, Verdantix conducted in-depth interviews with 11 multi-national firms - including Aviva, Boeing, Citigroup and Juniper Networks - in diverse sectors. All study participants had adopted cloud services for at least two years. Verdantix also interviewed experts from three cloud computing providers; and performed financial, economic and carbon reduction modeling.

Verdantix found that companies plan to accelerate their adoption of cloud computing from 10% to 69% of their information technology spend by 2020. Many of the firms interviewed reported cost savings as a primary motivator, with anticipated cost reductions as high as 40 to 50%.

According to the report, benefits of the switch to cloud computing include: helping users avoid costly up-front capital investments in infrastructure; improving time-to-market, as a new server can be created or brought online in minutes; providing greater flexibility, as clouds allow firms to pay for excess capacity only when they need it; avoiding the continual maintenance of excess capacity needed to handle spikes; and improving automation that helps drive process efficiencies.

"Carbon reduction is one driver, but not the primary driver," said Paul Stemmler of Citigroup. "The primary driver is time to market. Developers used to take 45 days to get new servers, but in the internal cloud infrastructure that we operate in our own private network, it takes just a couple of minutes."

According to Verdantix senior manager Stuart Neumann, the study also analyzed the impacts of transferring human resources to the cloud, and found that such investments could give a payback in under one year.

"A large percentage of global GDP is reliant on ICT - this is a critical issue as we strive to decouple economic growth from emissions growth," said CDP executive chairman Paul Dickinson. "The carbon emissions-reducing potential of cloud computing is a thrilling breakthrough, allowing companies to maximize performance, drive down costs, reduce inefficiency and minimize energy use - and therefore carbon emissions - all at the same time."

This study follows the release of CDP's recent paper, "Building a 21st Century Communications Economy."

Coming Events of Interest

TransmitCHINA Talks - September 14th-16th at the Great Wall of China. International leaders, thinkers, innovators, and creators will have an exclusive opportunity to hear a cross-section of preeminent thought leaders from some of the world's most innovative organizations in the digital and creative content ecosystem.

NY Games Conference - September 21st-22nd in New York, NY. The most influential decision-makers in the digital media industry gather at this event, now in its third year, to network, do deals, and share ideas about the future of games and connected entertainment. Lively debate on timely cutting-edge business topics.

Digital Music Forum West - October 5th-6th in Los Angeles. CA. Top music, technology, and policy leaders come together for high-level discussions and debate, intimate meetings, and unrivaled networking about the future of digital music. Digital Music Forum is known worldwide.

Digital Hollywood Fall - October 17th-20th in Marina del Rey, CA. Digital Hollywood (DH), the premier entertainment and technology conference in the country, once again welcomes the Variety Summit, which has been co-located with its past three DH events.

Future of Film Summit - November 7th-8th in Los Angeles, CA. An exclusive group of industry thought-leaders discuss the current state of the industry, and how film and transmedia deals will be struck in the coming years. This is a unique opportunity for creatives, producers, buyers, and film financiers.

Streaming Media West - November 8th-9th in Los Angeles, CA. Attended by more than 2,500 executives last year, SMW covers the entire online video ecosystem from content creation and management, to monetization and distribution. The number-one place to come see, learn, and discuss what is taking place with all forms of online video business models and technology.

World Telecom Summit 2011 - November 9th-11th in Singapore. The 2011 program will focus on topics that demonstrate innovation across the telecommunications industry, both on a commercial and technical level, to improve profitability and quality of next generation technologies and customer experiences.

Future of Television - November 17th-18th in New York, NY. Top television and digital media industry executives discuss the increasing importance digital media for the future of the television industry. Topics include viewer trends; programming for non-traditional platforms including online video, VOD, HD, IPTV, broadband and mobile.

Copyright 2008 Distributed Computing Industry Association
This page last updated July 29, 2011
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