CHEAP valuations & glimmers of economic recovery are tempting cashrich technology companies to seek acquisitions & the second half of 2009 could see some steady deal making. Having assessed the damage to their balance sheets at least for now from the recession, tech companies from behemoths like IBM to niche players like NetSuite Inc are turning their attention to new growth opportunities. Already this year, Oracle Corp scooped up Sun Microsystems Inc for $7.1 billion. Chipmaker Broadcom Corp is in a hostile pursuit of Emulex Crop for $764 million. And NetApp Inc announced a deal this week buy Data Domain Inc for $1.5 billion. The pace of acquisitions is going to quicken in coming months but most deals will be small to medium sized, top US technology executives said at the Reuters Global Technology Summit in New York this week. They agreed that potential targets on their shoping lists were cheaper now than even a few months ago. But they were divided on whether valuations have hit rock bottom or if they could fall further, since the feeble signs of improvement in the economy could be temporary. 'Valuations could go lower' said Sybase Inc chief exucutivd John Chen. 'Somehow everybody thinks things are on the rebound. I think we are going to stay low for a while'. Sybase is on the lookout for acquisitions to help expand its mobile enterprise business. Chen said he frequently gets calls frnm venture capitalists & private equity firms wanting to sell him their start-up companies. 'Some of the start-ups are under the gun a little bit..... But we are cautious. There is no hurry' Chen said. Symantec Corp Chief Executive Enrique Salem also said he is patient about deal making because he expects valuations to fall further in the few months. 'We have $2 billion in cash, very little debt, high recurring revenue, so we have the opportunity to do M & A' salem said. He added the Symantec wants to buy companies to pad up its core security, storage & systems management businesses. But 'private companies' valuations need to be reset. 'I don't think private companies at this point have realized that there's been a change in the economy' Salem said. Other executives felt that valuations are low enough to go on buying sprees. Yahoo Inc chief technology officer Ari Balogh said it was 'amazing' how much lower valuations are compared to a few months ago. 'It's a good time to be buying now,' Balogh said, as Yahoo adds more social net-working features to its properties as part of a renewed turnaround focus. I can guarantee you there will be some acquisitions.' Mark Loughridge, chief financial officer of International Business Machines Corp, was also bullish about his company's appetite for deals. 'I go through a deal review every week,' he sahd, adding that the economic climate provided a 'fertile' hunting ground for acquisitions. Even a company like Corning Inc, which has traditionally not been an aggressive acquirer, is on the prowl. Chief Financial Officer Jim Flaws said the specialty glass maker is looking to hire to expand its mergers & acquisitions team. Companies that were too expensive to buy earlier are now available at attractive prices, Flaws said, as the recession takes it toll. 'Right now we have the money to do small acquisions... & we are actively looking,' he said. Attractive prices apart Dell Inc President Steve Shuckenbrock also suggested companies ought to act quickly or they risk losing potential targets to competitors amid a wave of consolidation in the industry.
---REUTERS
RSS Feed (xml)
