PALO ALTO,  December 1, 2011 –  The way we shop is rapidly being influenced by scores of innovative young companies who are helping retailers, brands and consumers fundamentally reshape how goods and services are bought and sold.  Architect Partners LLC, the M&A advisory firm exclusively focused on Internet, mobile and digital media clients, today published “The Evolution of Shopping”.

“Shopping is at the early stages of profound change”, according to Eric Risley, Managing Partner of Architect Partners.  “Our newest report, The Evolution of Shopping, highlights why this evolution is happening, offers a framework to help understand who fits where in a very complicated ecosystem and features some of the most innovative companies making things happen.” “Retailers and brands are leveraging these changes to devise and implement strategies that are more consumer-centric.  An entire infrastructure is emerging to support their efforts,” according to Dr. Phil Hendrix, Director of IMMR, a research consultancy and contributor to The Evolution of Shopping.

“We, like many, are constantly deluged with the latest headlines from information sources like The Wall Street Journal, TechCrunch, Bloomberg and GigaOM.  What we’ve attempted to do with The Evolution of Shopping is provide some context to the headlines,” said Risley.

“We stepped back to the fundamentals to help us understand the innovation we’re seeing” explained Steve Payne, Partner with Architect Partners.  “We mapped how products are bought and sold as a seven step process.  From a retailer’s perspective these are 1) attract customers, 2) help them learn, 3) convert them to purchasers, 4) suggest additional purchases, 5) help them pay, 6) encourage and manage social signals and finally 7) encourage repeat purchases.  We then mapped over 300 companies against this framework.”

According to the U.S. Census Bureau, annual U.S. retail sales exceed $4 trillion.  Over time, much of this spending, not to mention global retail spending, is likely to be influenced by this evolution.  Incumbent suppliers to retailers and brands such as SAP, Oracle, IBM, Microsoft, NCR, Epicor, Visa, Mastercard, American Express and many others have major stakes in the outcome and are beginning to see emerging competition from a new set of competitors such as eBay, Amazon, Salesforce.com, Google and Apple.  Scores of young emerging companies are also likely to be important disrupters.

“Marquee M&A transactions have already occurred within this area, according to Tom Brehme, Principal with Architect Partners.  “I’d highlight eBay’s M&A appetite which has included the acquisitions of Hunch, Zong, Magento, WHERE and GSI Commerce for a total of over $3 billion just in the past 12 months.  Also, the purchase of radian6 by Salesforce.com is another transaction with very interesting ramifications” Brehme adds.  “We’re aware of over 75 significant M&A transactions which we’d place under the theme, evolution of shopping, which have occurred since the beginning of 2010.”

As we enter the holiday shopping season we see continued tangible signs of this evolution.  According to IBM’s Cyber Monday Report 2011, on-line shopping continues to show strong growth, up 33% from 2010.  Also, mobile device-initiated purchases are beginning to become meaningful, representing 6.6% of Cyber Monday 2011 sales.

Access to The Evolution of Shopping presentation is available on Architect Partners’ website at http://architectpartners.com/the-evolution-of-shopping/.

About Architect Partners LLC – insight-based M&A advisory

Architect Partners is a new breed of investment banking boutique focused exclusively on M&A advisory within the rapidly converging Internet, mobile and digital media sectors.  Complementing Architect Partners’ advisory efforts, AP frequently publishes strategy, sector and M&A research.  Architect Partners’ M&A Alert has assessed over 150 specific strategic M&A transactions and our M&A Snapshot provides a big picture view of current M&A activity within our sector.  Please visit www.architectpartners.com to sign up to receive our research.

Contact for further information:

Eric F. Risley

650.430.6446

apnews@architectpartners.com

They’re now listed as the first underwriter on all the hottest Web deals, including the initial public offerings of LinkedIn Corp., Pandora Media Inc., Groupon Inc. and Zynga Inc. Morgan Stanley is even in the running for the lead role in Facebook Inc.’s IPO, which looked like it was a shoo-in for its top rival Goldman Sachs Group Inc. (GS) only a few months ago.

Grimes, global co-head of Morgan Stanley’s technology investment banking, meets regularly with investors in search of the next Google Inc. (GOOG) or Amazon.com Inc. (AMZN) and has close ties to venture capitalists at Sequoia Capital, Kleiner Perkins Caufield & Byers and Greylock Partners. He’s also an early consumer of his clients’ products, whether that means widening his circle of contacts on LinkedIn’s network or spending hours building a digital metropolis in Zynga’s “CityVille” game.

“He quickly and astutely connects with companies and teams at that level because of his experience with the product, not just at a transactional level as an investment banker,” said David Sze, a partner at Menlo Park, California-based Greylock and a board member at LinkedIn and Pandora. “Companies sense that. They smell the authenticity.”

Grimes, 44, is leading the Internet field during a year of resurgent IPOs. Companies have held 117 U.S. offerings in 2011, a 29 percent increase from a year earlier and the most for any year at this point since 2007, according to data compiled by Bloomberg.

Goldman Sachs Rivalry

Morgan Stanley got an early jump on Goldman Sachs in January, when LinkedIn chose the bank to lead its offering. The next month music-streaming service Pandora picked the firm as well. Over the next few months, Morgan Stanley was tapped to lead sales by vacation-rental site HomeAway Inc. and Russian search engine Yandex NV.

Of the 10 biggest technology IPOs this year by offer size, Morgan Stanley has top billing on six, double the number for Goldman Sachs, filings show. And that doesn’t include Morgan Stanley’s prime spot for Groupon and Zynga, which haven’t gone public yet.

Groupon listed Morgan Stanley first even after Goldman Sachs Chief Executive Officer Lloyd Blankfein personally visited the startup in Chicago. While Goldman Sachs is co-leading the IPO, Morgan Stanley occupies the coveted upper-left hand corner of the box listing involved banks.

‘Prestige Spot’

“Upper-left is the prestige spot, and there’s a lot of fighting that goes into who earns that spot,” said Eric Risley, a managing partner at Architect Partners LLC in Menlo Park, who has worked as an investment banker for 22 years. With Zynga’s IPO, Morgan Stanley also is to the left, though Goldman Sachs is co-leading the deal.

Grimes declined to be interviewed for this story. Andrea Rachman, a spokeswoman for New York-based Goldman Sachs, also declined to comment.

Grimes’s penchant for nabbing deals will be put to the test as Morgan Stanley vies with Goldman Sachs for the biggest prize yet: Facebook’s IPO. The Palo Alto, California-based company, with a private-market valuation of $71 billion, has yet to file. It’s poised to dwarf even Google’s 2004 IPO.

Morgan Stanley’s underwriting hasn’t gone without criticism. The doubling of LinkedIn’s shares on their debut raised concern that Morgan Stanley and the IPO’s other banks could have set a higher initial price.

‘Mother of All IPOs’

Goldman Sachs sealed an early advantage with Facebook in January, when it announced a $1.5 billion investment in the social network, buying a $450 million stake at a $50 billion valuation. Goldman Sachs halted plans to offer shares to U.S. investors days later, citing concerns that the deal may violate rules limiting marketing of private securities.

“The mother of all IPOs in the near term is going to be Facebook,” said Michael Kim, a former Morgan Stanley banker who invests in venture funds as managing partner of Cendana Capital in San Francisco. “Morgan Stanley, by having established its track record in 2011 with LinkedIn, Groupon and Pandora, is very well positioned to be the lead underwriter.”

Grimes, a Los Angeles native who graduated from the University of California at Berkeley, joined Morgan Stanley in 1995, when the technology banking team was led by Frank Quattrone. He served as a managing director until 2005 when he and Paul Chamberlain were promoted to be co-heads of the global technology investment banking group.

‘Last Man Standing’

In 16 years at the firm, Grimes has been responsible for financings and merger transactions topping $100 billion in total value, according to his LinkedIn profile. He worked on Google’s IPO in 2004, Ancestry.com Inc. (ACOM)’s offering in 2009 and Hewlett- Packard Co.’s purchase of 3Com Corp. last year.

His most important move may have been one he didn’t make. After the dot-com bust, Goldman Sachs and Credit Suisse Group AG’s investment bank cut back on Silicon Valley office space, and more than 4,000 financial services jobs were lost in the San Francisco Bay area in the ensuing years. Grimes was one of the people who stuck around.

“He could be considered the last man standing from the 1990s and all the action that occurred in the dot-com boom,” said Ken Goldman, chief financial officer at Fortinet Inc. (FTNT), whose IPO was handled by Morgan Stanley in 2009. “Many of his competitors have either moved on or retired, and he still is actively engaged and probably more engaged than ever.”

Omniture Overtures

Morgan Stanley established its technology beachhead in Silicon Valley in 1994. Five years later, Goldman Sachs set up shop across the street.

Chamberlain, who was then head of Morgan Stanley’s office, sent a basket of fruit to the Goldman team, according to an article in the San Jose Mercury News in 2000. The attached note said, “Welcome. I guess this means, ‘There goes the neighborhood.’”

Two years after the stock market reached bottom in 2002, Morgan Stanley landed Google’s IPO. Grimes and his teammate, Paul Kwan, also began pitching their services to Omniture Inc., a Web-analysis company near Salt Lake City. That put Morgan Stanley in position to lead the IPO in 2006 and advise the company on its 2009 sale to Adobe Systems Inc. for $1.8 billion.

“Every banker that comes into your office is a meat- eating, blood-sucking capitalist, so how do you figure out which one you can trust,” said Josh James, co-founder of Omniture. “They were willing to get on a plane and fly to Salt Lake City to meet us when we were a little Podunk company.”

‘CityVille’ Player

Grimes’s relationship with Zynga CEO Mark Pincus extends to the virtual world, where the two are connected on the company’s two most popular Facebook games, “CityVille” and “Empires & Allies.”

Kim, of Cendana Capital, is connected to both of them on the games, and sees them playing frequently. “CityVille,” which Zynga introduced late last year, lets users build a city by constructing buildings and collecting rent.

“It’s not just that Michael is building out a level or two, he’s pretty advanced in his game playing,” said Kim, who worked with Grimes from 1997 to 2000.

Grimes lives in Hillsborough, an affluent town halfway between the bustling San Francisco startup scene and Menlo Park’s venture capital community. He’s fond of taking clients to the Village Pub, a Michelin-rated restaurant in nearby Woodside, said Fortinet’s Goldman.

Grimes is a longtime fan of the Los Angeles Lakers professional basketball team and a contributor to political campaigns. In 2009, he gave $2,400 to Republican Carly Fiorina’s losing bid for the U.S. Senate in California, according to Campaignmoney.com. Last year, he contributed the same amount to Republican Scott Brown in Massachusetts, who won Edward Kennedy’s old Senate seat.

Outside Fiorina’s Office

His relationship with Fiorina dates to her days at Hewlett- Packard, where she was CEO from 1999 to 2005. Near the beginning of her term, Grimes spent a full day camped outside her office to try and get a meeting for a big acquisition Hewlett-Packard was trying to make, said Kim, without providing details. Grimes eventually got the deal.

“He’s aggressive and patient and really looks to win business the hard way,” Kim said.

Another reason for the firm’s success is the longevity of its team, said Greylock’s Sze, who’s been working with Grimes throughout his decade in venture capital. Chamberlain has been at the firm since 1990, Drew Guevara since 1995, Kwan since 1999 and Colin Stewart since 1988.

The bank has now built ties with the current crop of entrepreneurs, such as Groupon Chairman Eric Lefkofsky. Morgan Stanley previously led the IPOs of Lefkofsky’s earlier startups, Echo Global Logistics Inc. (ECHO) and InnerWorkings Inc. (INWK)

“They put in the work necessary ahead of time to build these relationships and win these deals,” said Harry Weller, a Chevy Chase, Maryland-based partner at New Enterprise Associates, the first venture investor in Groupon. Grimes “gets to know companies really early, much earlier than most people, and before they are actually in need of true investment banking.”

To contact the reporters on this story: Ari Levy in San Francisco at alevy5@bloomberg.net; Douglas Macmillan in New York at dmacmillan3@bloomberg.net; Serena Saitto in New York at ssaitto@bloomberg.net

To contact the editors responsible for this story: Tom Giles at tgiles5@bloomberg.net; Jennifer Sondag at jsondag@bloomberg.net

“We haven’t taken money off the table because we see a huge market opportunity here,” said Fred Anderson, who co- founded Menlo Park, California-based Elevation with Roger McNamee and U2’s Bono. “This is a marathon.”

After investing $460 million from 2007 through 2009, Elevation rode a threefold gain in Palm’s stock last year, buoyed in part by speculation that the company would be bought by Nokia Oyj. Elevation isn’t counting on a takeover, Anderson says. Instead, Palm can thrive by enlisting more carriers worldwide and adding phone applications, he says, even as Apple and Google step up competition.

Palm will discuss its next steps at a press conference tomorrow at the Consumer Electronics Show in Las Vegas. Palm plans to announce a partnership with Verizon Wireless at the event, according to a person familiar with the matter. Verizon, the top U.S. mobile-phone service, will sell Palm’s Pre and Pixi models starting this month, the person said.

Deal With AT&T

AT&T Inc., the second-biggest U.S. wireless carrier, said it too would be adding two phones from Palm, in the first half. Ralph de la Vega, head of AT&T’s wireless business, discussed the plans today at CES, without giving details on the phones.

Elevation’s bullishness isn’t shared by some investors, who don’t expect Palm to gain market share. The company’s short interest ratio, which measures whether investors are betting that the stock will fall, was 8.6 percent in December, compared with 0.6 percent for Apple and 1.9 percent for Google. Palm shares have tumbled 36 percent since reaching their 2009 high of $17.46 in September.

Google, owner of the most popular search engine, announced a new smartphone called the Nexus One yesterday. The phone uses Google’s Android operating system, which is developed openly by a worldwide community of programmers.

The Pre and Pixi phones, Palm’s first models using its new WebOS operating system, are currently only available in the U.S. through Sprint Nextel Corp., the country’s No. 3 carrier. That’s limited Palm’s pool of potential customers. Telefonica SA, based in Madrid, introduced the Pre in Europe in October.

More Applications

Palm also will open up its application platform at CES, allowing third-party developers to build programs, Chief Executive Officer Jon Rubinstein said last month. Palm has 800 applications from early partners and expects to have thousands soon. That compares with the Apple iPhone’s more than 100,000 applications.

“We have to establish a very strong developer ecosystem,” said Anderson, 65. That requires “a critical mass of very high quality third-party applications.”

Derick Mains, a spokesman for Sunnyvale, California-based Palm, declined to comment on takeover speculation or any future announcements. Palm used CES to unveil the Pre a year ago.

Elevation has a 30 percent stake in Palm. Its total investment has gained about 54 percent, based on the average purchase price of about $6.85 a share. In September, Elevation bought $35 million in stock at $16.25 a share, 54 percent higher than yesterday’s closing price.

Stock Rally

Palm rose 68 cents, or 6.5 percent, to $11.23 at 4 p.m. New York time on the Nasdaq Stock Market. The shares jumped more than fivefold in the first nine months of 2009 as investors waited for the Pre to catch on. Palm had traded for as little as $1.42 in December 2008, when its previous generation of devices was eclipsed by rivals’ newer smartphones.

The Pre and Pixi are a bid to restore the company’s reputation as a technology innovator. Still, even with the new devices, Palm has struggled to gain ground on the iPhone, Research In Motion Ltd.’s BlackBerry and Android phones. That’s fueled speculation that Palm would be better off getting acquired.

A takeover by Espoo, Finland-based Nokia, the world’s largest mobile-phone company, would make “strategic sense,” Shaw Wu, a Kaufman Bros. analyst in San Francisco, said in July.

Other potential suitors include Microsoft Corp. and Dell Inc., said Eric Risley, founder of Architect Partners, a Menlo Park-based merger-and-acquisition advisory firm.

Arja Suominen, a Nokia spokeswoman, said her company doesn’t comment on market rumors. Jennifer Davis, a spokeswoman for Round Rock, Texas-based Dell, declined to comment, as did Mark Murray, a spokesman for Redmond, Washington-based Microsoft.

‘Multiple Winners’

Palm doesn’t need to be acquired to succeed, said Anderson, who also serves on the company’s board. “This market is so big that you can have multiple winners,” he said.

Mounting competition may make it tough for Palm to stay solo, Risley said. Palm shares sank 13 percent after the company reported its 10th straight quarterly loss on Dec. 17.

“They’re going to have to get a break or get lucky to get some momentum,” said Risley, who has spent 18 years as a technology investment banker and was head of the software group at Bank of America Corp.’s securities unit. “It’s hard to compete against the huge wave that Apple and Android represent.”

Market Share

Palm’s share of the global smartphone market fell to 1.4 percent in the third quarter from 2.7 percent a year earlier, according to research firm Gartner Inc. in Stamford, Connecticut. Research In Motion, based in Waterloo, Ontario, increased its share to 20.8 percent from 15.9 percent, and Cupertino, California-based Apple rose to 17.1 percent from 12.9 percent.

Anderson, the former finance chief at Apple, co-founded Elevation in 2004. Rubinstein, who helped develop Apple’s iPod, was recruited by Elevation to become Palm’s chairman in 2007 and was named CEO in June.

Under Rubinstein, sales have yet to take off. Palm said last month that the number of smartphones shipped fell 5 percent in the third quarter from the previous period to 783,000. Prices have tumbled as well: The Pixi, released in November, can be purchased at Amazon.com Inc. for $24.99.

“What we aren’t necessarily seeing from Palm right now is that second, third, fourth device that’s going to build on the success of the Pre and really solidify their place,” said Elaine Sanfilippo, director of consumer technologies at Compete Inc., a Boston-based market research firm.

To contact the reporter on this story: Ari Levy in San Francisco at alevy5@bloomberg.net

View original article here.

Last Updated by Bloomberg: January 6, 2010 16:51 EST