TrendBillion-dollar acquisition deals herald changes in tech industry
More and more, workers and consumers are using smart phones and other mobile devices instead of desktop computers; at the same time, growing numbers of businesses and others are housing their information in data centers that can be accessed over the Internet, a trend known as “cloud computing”; to cash in on these trends, tech giants are racing to snap up established corporations and catapult themselves into new markets without having to spend years trying to develop the technology themselves; in some cases, the deals have intensified competition in the industry
From Hewlett-Packard and Cisco Systems to Intel and Oracle, some of Silicon Valley’s largest companies charged out of the recession with fat bankrolls and a determination to spend whatever it takes this year to reshape their businesses around emerging technologies.
If the buying binge continues, 2010 could rank among the biggest for billion-dollar deals in a decade. Tech companies already have announced six purchases worth at least $1 billion so far this year, according to The 451 Group, which has compiled such data since 2002. The previous record — last set in 2009 — was seven.
San Jose mercury News’s Steve Johnson and Brandon Bailey write that more and more, workers and consumers are using smart phones and other mobile devices instead of desktop computers. At the same time, growing numbers of businesses and others are housing their information in data centers that can be accessed over the Internet, a trend known as “cloud computing.”
To cash in on those trends, tech giants are racing to snap up established corporations and catapult themselves into new markets without having to spend years trying to develop the technology themselves. In some cases, the deals have intensified competition in the industry.
“Computing has shifted,” R. “Ray” Wang, a veteran tech consultant with the Altimeter Group, told Johnson and Bailey. Noting that for many computer hardware firms, such as HP and Intel, “the future means they have to do more in software,” he added, “I think we’re going to continue seeing this kind of consolidation.”
During the depths of the recession two years ago, many firms’ boards balked at buying anything. “If you were a CEO or a CFO and said, ‘I’ve got a great deal lined up,’ they said, ‘Now’s not the time,’” said 451 analyst Brenon Daly.
Instead, companies cut costs and stockpiled cash. They are more free-spending now, experts say, in part because the sagging stock market has made it cheaper to buy public companies and because the interest rates paid on savings are so low.
“Nobody’s making any money on cash these days,” said Shannon Cross, an investment analyst with Cross Research. “But if you buy something that’s making money, that contributes to your business.”
HP reported $14.7 billion in cash and short-term investments as of last month, while Intel said it had $12.2 billion as of July.
Another major motivation for buying other businesses is to expand into new markets. “They want to have a full-service offering to
