Seven big tech acquisitions to watch for in 2009

Seven big tech acquisitions to watch for in 2009

Summary: With many of the big tech companies hording piles of cash and many unstable companies licking their wounds from the recession, the tech industry is ripe for consolidation. See which potential acquisitions would make the most sense.

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In this economy, cash is king. Since in the end of 2008, big tech companies have been stuffing cash under their mattresses in case the current recession goes longer and deeper than expected.  Even companies with strong balance sheets have been cutting costs, laying off workers, and scaling back projects in order to build up their war chests.

As a result, you have companies racking up huge cash reserves, including Cisco ($26.7 billion), Apple ($24.5 billion), Microsoft ($19.7 billion), and Google ($14.4 billion).

Meanwhile, with the stock market shedding half of its value between July 2007 and January 2009, the market price of a lot of public technology companies has essentially been put on a "50% off sale."

This creates an atmosphere that is ripe for consolidation. As soon as the companies with the cash have confidence that the economy is at an inflection point, they will start spending money to position themselves for the turnaround.

We may be starting to see it. The Dow Jones Industrial Average has jumped over 1,000 points in the past 30 days. While that may be nothing more than a bear rally, during this time we've seen IBM make a play for Sun Microsystems. Although that deal fell apart, we should expect more tech acquisitions in 2009. Here are the seven most likely deals.

7. Apple buys Adobe

Apple has an extremely strong balance sheet, so you would expect it to be one of the first companies to go on a buying spree, but Apple historically does not do many acquisitions. Its most high-profile purchase was NeXT in 1997 - the move that brought Steve Jobs back to Apple.

The biggest acquisition you're likely to see from Apple in 2009 would be to buy Adobe, which has a wide array of software tools for graphic artists, photographers, and Web designers - some of Apple's most loyal Macintosh customers. With the iPhone and its App Store, Apple appears to have learned the lesson that the software makes the platform. And since Adobe is already building online tools such as Photoshop Express, it could also help Apple get a jump on the next generation of applications.

Of course, the big question mark here is that Adobe also makes its software for the Windows platform - and certainly sells more to Windows users - so if Apple bought Adobe would it make Adobe software Mac-only to try to drive more artists and designers to its platform, or would it use the opportunity to grow its software revenue from Windows users?

6. Oracle buys Salesforce.com

Oracle has talked a good game about cloud computing for a long time - long before it was actually called "cloud computing" - but the company is also heavily invested in the old software licensing model because that's where nearly all of Oracle's revenue comes from. So Oracle is making a glacial transition from the old world to the new world.

Salesforce.com is business world's most successful Software-as-a-Service application and its founder and CEO, Marc Benioff, was a 13-year Oracle veteran before he left to start Salesforce.com. Thus, Benioff knows Oracle CEO Larry Ellison very well. Many in Silicon Valley expect that it's only a matter of time before Oracle scoops up Salesforce.com at a fair price.

Has Salesforce.com matured enough and does Oracle feel threatened enough by other online application competitors to make 2009 the year for this acquisition to happen? The odds are probably 50/50.

5. Google buys Skype

Nearly everyone in the technology industry scratched their heads in September 2005 when eBay bought Skype for $2.6 billion. Why would an online auction site want to purchase peer-to-peer VoIP and collaboration software? Three and half years later, it still doesn't make sense.

In fact, in October 2007, eBay took a $900 million write-down of Skype - an acknowledgement that Skype wasn't worth as much as eBay had paid for it two years earlier. There are even rumors that Skype founders Niklas Zennstrom and Janus Friis are trying to convince private equity firms to help them buy back Skype from eBay.

One of the losing bidders for Skype at the time eBay bought it was Google. Since then, Google has launched Google Voice and Google Chat but has barely made a dent in Skype's market share. Google reportedly walked away in 2005 when the price got too high. The price would be much more palatable now, and Google still wants to find a place in the real-time communications market, so this could be an ideal play.

If not Google, then look for Cisco as another potential suitor for Skype. Cisco could make Skype interoperate with its enterprise VoIP systems and expand Skype to include some of the same communication and collaboration tools that Cisco has built into its enterprise VoIP software.

UPDATE: EBay now says that it will spin off Skype with an IPO in 2010; however, Skype remains a viable acquisition target in the meantime.

4. Microsoft buys Palm

Despite the fact that Microsoft has been in the mobile PDA/smartphone market for over a decade with Windows Mobile (formerly Windows CE) and has respectable market share numbers, the company's software lags woefully behind iPhone, BlackBerry, and Symbian, and there's no indication that Microsoft is making major progress.

Since 2008 was the first year that smartphones outsold laptops, it's clear that smartphones are increasingly becoming valuable "computers" for consumers and professionals on the go, and the smartphone market is a huge growth business in the years ahead.

Thus, Microsoft needs to make a bold move in the mobile space. The best option for making up ground quickly would be to buy Palm. The popularizer of the PDA has mobile development baked into it genetic structure, plus it has former Apple executive John Rubinstein, and it has its new Palm webOS, a next generation mobile platform that could give Microsoft the opportunity to get a jump on Apple, RIM, and Nokia.

3. IBM buys Red Hat

These two have had a 10-year partnership that has helped propel Linux into the mainstream as a viable platform in the data center. IBM clearly wants to dislodge itself from Microsoft's grip as much as possible and, as such, is promoting "Big Green Linux," "Security-Enhanced Linux," even corporate Linux desktops.

The best way to ramp up these strategies would be to go beyond cooperation and coordination with Red Hat and simply buy the company and integrate it into IBM. If IBM doesn't buy Red Hat, look for Oracle to make a run at it. Oracle already offers support contracts for Red Hat Linux since its software runs on top of Red Hat as one of its primary platforms.

2. Cisco buys VMware

Enterprise storage giant EMC acquired VMware for $635 million in 2003, so technically VMware is not for sale. However, while VMware is the current market leader in virtualization, it is under attack from Citrix and Microsoft, and EMC can't necessarily do a whole lot to help so you could see EMC sell VMware.

Meanwhile, last month Cisco announced its intention in jump into the data center market with blade servers, and it named a variety of the partners involved in the initiative, including VMware. Cisco wants to go big with virtualization and make it mainstream as quickly as possible in order to use the technology to make data centers more flexible, more manageable, and more energy-efficient.

While Microsoft and Citrix have VMware surrounded in the virtualization market, and could use their advantages to undermine VMware, Cisco has deep pockets to help develop the technology, plus a variety of other data center technologies to integrate VMware with, and a powerful marketing engine to promote it.

1. Dell and EMC merge

Perhaps the biggest technology deal of 2009 could be a tie-up between Dell and EMC, which would nearly rival the HP-Compaq blockbuster in 2001. Like other pairings on this list, Dell and EMC have had a long-term partnership so they already know each other well.

Dell is struggling through a period in which it is trying to re-invent itself on a number of fronts - product design, customer service, and distribution. Meanwhile, EMC, the world's leading storage vendor, is flush with cash and has the opportunity to make a big move.

Because EMC operates at the top end of the enterprise market with mainframes and big Unix servers while Dell has a stronghold in the mid-level enterprise market with Windows and Linux servers, the combination of the two would create a powerful data center company.

The challenge may be that EMC has just become a key partner for Cisco in its new data center strategy, and EMC also has relationships with IBM. However, a closer relationship with either of those two would mean EMC playing second fiddle, but a merger with Dell could give EMC a much more visible leadership role in the data center market.

Other companies that could become acquisition targets in 2009:

  • Sun Microsystems
  • Juniper Networks
  • Unisys
  • NetApp
  • Citrix

Topics: Storage, Apple, VMware, Software, Oracle, Mobility, Microsoft, Hardware, Google, Enterprise Software, Dell, Data Centers, Collaboration, Cisco, Social Enterprise

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24 comments
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  • Oh please

    Apple buy Adobe? They would never deplete their cash that much.
    Adobe would be very expensive. And as for the comment about Adobe certainly selling more than half to Windows users, that's barely true,
    but not nearly as much as people think. It's pretty close to half.

    Apple sells a very strong application for Windows. Filemaker Pro. It's
    very popular and large Enterprises use it rather than Microsoft
    solutions in that space. So don't count Apple out even if they were to
    buy Adobe.

    I'd think Apple would be smart to buy Sun instead to keep it out of
    IBM's hands, and to give them an edge in the enterprise they've never
    had. Not to mention a large number of servers that run the backbone
    of the Internet.
    ewelch
    • apple and sun would be a much better match...

      they both offer complete solutions. hardware and os in one package. i don't really see sun surviving in the hands of microsoft. also, not sure apple really wants to get that deep into the windows market with adobe. with sun tho, a little rebranding and some good marketing, both of which apple excels at, and the two could make one hell of a company. definitely in good enough shape to take on big brother himself.
      brokndodge@...
      • If Apple bought Adobe

        it would be to kill the Windows version of their product line. Though that
        might raise the eyebrows of the anti-trust crowd.
        frgough
        • Expressions

          M$ Expressions! omg rofl never mind thats not a real product that can
          compete.
          z3r0_f4ct0r
        • If Apple bought Adobe

          Don't be so sure..Adobe has a balance sheet based to MS sales.It could of course realign its product line in time to develope expert apps for Opensource and Apple to kick this into touch.
          The Management consultant
    • It would take less than 50%

      of their cash reserves. Not trivial, but massive depletion, either. And
      Apple and Adobe have not been on the friendliest terms lately.
      frgough
  • Apple

    What would Apple get?Technology they will not have experience of managing? Apple does not have a strong enough management board to handle the running of sun...What could Apple expect? A large software community, a ready made enterprise system and global reach.Sun ?..Cash,Retail marketing and design expertise.These guys do have different cultural ways of working.Could work if Jobs resigned and a tough global board appointed.

    There is a rumour that Siemans has now been looking at sun
    The Management consultant
    • Apple Sun Perfect!!!

      Apple is already incorporating major features of Solaris into Mac OS X.
      Both OS's are BSD based and Sun and Apple have collaborated in
      software in the past, in fact Apple has contributed a large chunk of
      code to improve Java. Apple and Sun are perfect for each other and
      would give M$ a run for its money if they merge. Tim Cook can
      manage Sun easily, and Steve Jobs is capable of being the CEO of 2
      companies so why not Sun. Apple and Sun complement each other
      perfectly, their products do not overlap like with IBM and Apple's
      consumer/pro products would work great with Sun on the backend.
      ZFS + StorageTek would be a big boon for video and media heavy
      applications. Sun Grid Engine + Xgrid for renderfarms, clusters etc...
      There are a lot of places where each others products fir. Siemans
      knows nothing about IT, they would definitely mismanage Sun.
      z3r0_f4ct0r
      • "would give M$ a run for its money if they merge"...

        LOL - now that's funny. That would be a bad move for Apple...very bad.
        ItsTheBottomLine
  • Storming

    In the manner of brainstorming ...

    1. M$ buy Adobe (hostile takeover?)

    Kill/reorganise duplicate developments for cost savings/leverage

    - Silverlight v Flash
    - PDF v ODF
    - Azure v Air
    - cloud services e.g. photo editing

    Rather than load our PC's with crapware how about Macrobesoft Master Suite CS5 Starter Pack?
    Option : you want CS5 on a MAC? Good job you have more money than sense and are used to paying 'the tax'. Should be available in 2015 :-(

    2. App?e buy SUN

    Enterprise entry.

    MAC PRO with T2 processor (gotta disprove DELL's claim that x86 is more efficient - cue Paul Murphy). Go faster stripes ... also goes faster ;-)

    3. Google 'buys' Content

    Negociates agreement with all major content providers and ISP's to replace The Pirate Bay with a legal, value-for-money Digital Emporium and global distribution mechanism: films, music, photographs, art, broadcast TV, newspapers ... if its digital its here. Do you want 10Mbs, 50Mbs or 100 Mbs with that sir? All your advertising are belong to us.

    For Google substitute Microhoo.

    4. IBM buys VMware

    How many VM's do you want to run on our Z series mainframe? OK, you only need half the box then. Our services people will be along to help with your migration strategy.
    jacksonjohn
  • RE: Seven big tech acquisitions to watch for in 2009

    Good Anaylsis,
    I wonder. Where do these companies keep all of that cash, I mean what type of accounts? The normal accounts only insure $250,000 and I know they don't have their money spread over millions of banks
    techclubs@...
    • generally speaking

      It's T-bills and cash accounts. In either case it's earning little
      Larry Dignan
  • Adobe - has little respect for it's customer so why bother with them -NT

    NT
    raycote
  • I have to disagree completely.

    Most of the possible buyouts you mentioned are companies that are not doing well because they are still operating under old paradigms and have not invested in newer technologies.

    What I see to be more likely is that newer and disruptive technologies will reshape the competitive landscape and companies that can and will invest in them will come out on top.
    No_Ax_to_Grind
  • RE: Seven big tech acquisitions to watch for in 2009

    Hi,

    Very interesting combinations and certainly ones to watch in 2009. The ones I find most likely are Apple & Adobe and Oracle & Salesforce.com. I disagree with the comment that these are all "old-paradigm" companies...Adobe is very successful and we should not be too fast to jump on the hype bandwagon...everyone was predicting big companies to fall during the dot-com boom but they didn't. Old does not mean bad and jumping on Web X.0 for no business reason makes no business sense!
    meyerse71
  • Microsoft buy Palm? Hahahaha....

    First, Microsoft would need to get to know Palm. Let me ask you a few questions, and I expect answers immediately. First of all, Microsoft is the single most important company in IT period. If Dell thinks it can merge with anyone, they better look out. Dell/EMC merger would force Dell to take their eye off of making sure their desktops are Windows 7 compatible starting day one. Cisco and VMware? Cisco better be careful because Microsoft will alter the TCP/IP stack so that Windows server and client packets do not acknowledge Cisco routers and switches. Apple is an afterthought. Google is finished. I am off with my rep for a late afternoon latte.
    Mike Cox
  • Big mega corps.......

    I do NOT want to work for a Mega Corp again, IF I had to
    I would but being a number in a big quagmire of brown-nosers
    and unqualified people making terrible decisions is not
    my cup of tea.

    Working for a smaller company, you make more money and
    you can build the environment AS you see it is best suited

    Not some guy who kisses butt and gets taken out to dinner
    to buy some garbage ware.

    Plus, you can use Open_Source technologies bypassing ALL
    Microsoft software PERMANENTLY!!!!!

    When the end user has a Linux distro and they use it, they
    actually enjoy it more than a Wormdows OS.

    :)
    Christian_<><
  • apple, 30 bn in cash

    is it so hard to get the facts straight?
    bannedfromzdnetagain
  • web os, a joke?

    when the first iphone came out with an web os sdk (html,
    javascrip, css, basically the app is just a website) all the
    pundits were crying foul, that this is too little, not a real os and
    the iphone will be doomed with it.

    how come palm introduces the same web plattform 2 years
    later and now the same pundits think that web os is a next
    generation mobile os? am i missing something here?
    bannedfromzdnetagain
    • Yes.

      One has an Apple logo on it, and the other one doesn't.
      frgough