Analyst claims semiconductor industry is in dire straits

The first speaker at this year’s White Bull VC conference gave a gloomy prognosis on venture capital investments into the IT business, even though the IT majors have loads of cash swilling about that they don’t know how to spend.

Even the semiconductor industry is down, according to Manish Madhvani, from GP Bullhound. Microsoft and Intel are old hat, he said. And he admitted his predictions were a bit down from last year.

But nevertheless the M&A market is still buoyant, although he cautioned against future buoyancy.  Apple has just bought bolt-ons. Google has been on a huge spree, averaging two acquistions a month. Madhvani was surprised that Qualcomm hadn’t bought more.

In the IT industry, the amount of cash they are still building up is “staggering” said Madhvani. Apple, Dell, Cisco and Oracle have huge cash reserves and that leads to acquisitions, he said. They have gazillions or over a trillion in cash, he said. Many don’t like giving dividends to their shareholders but they have to justify their vast cash reserves, he said.

A lot of them have offshored their cash in Ireland, he claimed. Asian players have huge cash reserves built up but he didn’t say where the Asian players were offshoring their cash. And they hadn’t bought or acquired companies like he thought they would this time last year.

Dating is up, he said, which must be good for the Valentine Card market. If you can become a number one or number two player, you are quids in. Emerging players in the BRIC countries, acquisitions are worth more, and that’s all to do with growth rates. “Russia is growing at an unbelievable rate,” he said. PE players will pay more than regular companies, he claimed.

Madhvani said that this time last year that ecommerce 2.0 is “fuelling the M&A market” and we were seeing this to “an extent”. The Groupon effect is affecting everyone. Traditional retailers are at last realising they have to pay up and shut up.

Madhvani said he called it wrong last year about mobile. Everyone is thinking about mobile. Microsoft and the rest are jostling for position. There were a few acquisitions but not as many as he expected – this time last year. There was a flurry of activity in mobile phone advertising, he claimed. “This is a land grab,” said Madhvani.