Billion-dollar acquisition deals herald changes in tech industry

be able to serve the really big customers” who tend to dislike dealing with multiple suppliers, said Richard Hanley, a transactions expert with KPMG.

Moreover, many tech companies remain nervous about how their products will fare in the future. So they are hedging their bets by buying other companies to acquire different products, according to Crawford Del Prete of the research firm IDC. “It’s very much a symptom of the uncertain times,” Del Prete said.

Johnson and Bailey write that one example of companies desperate to branch out is Palo Alto, California-based HP and its rival Dell, which sparred earlier this month over Fremont, California-based data-storage provider 3Par. HP eventually won the bidding war with a $2.4 billion offer, more than three times the price of 3Par’s stock before takeover talks began.

Both computer makers coveted 3Par because they wanted to improve their data-storage product lines, said analyst Unni Narayanan of Primary Global Research. In addition, 3Par’s products help data center operators boost their storage capacity and quickly reassign workloads across multiple devices, as users’ needs change — important features for increasingly popular cloud computing. The IDC research firm predicts global sales of cloud-computing products will grow from $16.5 billion in 2009 to $55.5 billion in 2014.

Mobile Internet-ready gadgets are another fast-growing market. More than 450 million people worldwide were using such devices in 2009 and that figure is expected to double by 2013, according to IDC. That is a big lure for some Silicon Valley corporations, including Intel of Santa Clara, California.

The company’s microprocessors serve as the brains of the vast majority of personal computers. It fears being left out of smart phones, however, which predominately use chips from other firms.

Last month, Intel announced plans to pay $7.68 billion for software security company McAfee of Santa Clara and $1.4 billion for the wireless chip unit of Infineon Technologies of Germany. By building both companies’ technology into its chips, Intel hopes to win more sales from mobile-device makers.

Johnson and Bailey write note that the desire to gain software has prompted other deals. Cisco of San Jose, California, which has been expanding beyond its core networking business for several years, said this month that it would buy ExtendMedia, a start-up that makes software for managing and delivering video over the Internet. Mountain View, California-based Google also has scooped up several small social-gaming companies.

Then there is Oracle of Redwood City, California. Already a software giant, it paid $7.4 billion for Sun Microsystems, partly to obtain its Java software programming tools. Oracle also wanted Sun as a way of selling integrated systems that combine Sun’s server and data-storage hardware with Oracle’s business and database software.

Which brings us to the fact that the buying spree is creating more competition. Because of these corporate tectonic shifts, several Silicon Valley companies that once occupied separate business turfs are now vying for the same territory.

In deciding last year to begin selling server computers, Cisco went head to head with HP’s server division, for example, while HP’s $2.7 billion purchase of 3Com gave it networking products to compete with those of Cisco.

Another example is HP’s $1.2 billion purchase of Palm, mainly to obtain that company’s phone operating system. HP plans to use it in a variety of smart phones, tablets and other mobile devices, potentially pitting it against Apple’s mobile gadgets and Google’s Android operating system.

Competing has its risks, Johnson and Bailey note. Because it is often hard to keep growing fast internally, however, big companies frequently can not resist the temptation to bolster their bottom lines by gobbling up other businesses, said Kaufman Brothers tech analyst Shaw Wu. “When a company reaches that stage, there’s a need to do something about it,” he said, “and that’s typically done through an acquisition.”