Digital convergence 'will drive new tech boom'

Consumer demand for new technologies is putting companies under pressure to gain a foothold or consolidate their positions in converged industries

Analyst and consultancy firm PricewaterhouseCoopers (PwC) has predicted a boom in the IT sector, driven by digital convergence.

In a report published on Tuesday, PwC claimed that consumer demand for new technologies is putting companies under pressure to gain a foothold or consolidate their positions in industries that bring together computer, telecommunications, broadcast and recording technologies.

This convergence will see companies forming more strategic partnerships and executing more mergers and acquisitions, according to the consultancy company, which said that the success of a second technology boom would depend on strategic partnerships that fulfil emerging consumer needs.

"Companies are under pressure to gain footholds in digitally related industries and markets, but executives see mergers and acquisitions (M&A) as a means of capturing entire beachheads," said Andy Morgan, partner at PwC, in a statement.

"To be a player in today's integrated technology landscape, they must quickly take advantage of others' core competencies," Morgan added.

2006 has already seen several high-profile takeovers and alliances, including the merger of NTL and Virgin Mobile and a partnership betwen Yahoo and eBay.

Executives have learned from the dot-com bubble and are approaching partnerships and M&A more cautiously and strategically, PwC believes. Just over half of the chief executives interviewed for the survey favoured alliances over M&A.

"Partnerships often offer less permanent financial risk to a corporation, although alliances may also move too slowly to capitalise on a fast-moving opportunity," said PwC.

Software developers were listed by survey participants as the most likely target for acquisition, followed by business information content developers, wireless companies, entertainment content developers and consumer-electronics device makers.

The survey, launched on Tuesday, is called "Technology Executive Connections — Shaping digital convergence through mergers and acquisitions".


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