Tech firms scout deals as values take a plunge

Tech firms scout deals as values take a plunge

Scooping spree


Having assessed the damage to their balance sheets 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 Corp for $764 million. And NetApp Inc announced a deal this week to 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. They agreed that potential targets on their shopping 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.

Buying opportunities

Symantec Corp Chief Executive Enrique Salem said he is patient about dealmaking because he expects valuations to fall further in the next few months. He added that Symantec wants to buy companies to pad up its core security, storage and systems management businesses. But “private companies’ valuations need to be reset. I don’t think private companies at this point have realised 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.  Mark Loughridge, chief financial officer of International Business Machines Corp, was also bullish about his company’s appetite for deals.

Even a company like Corning Inc, which has traditionally not been an aggressive acquirer, is on the prowl.  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.

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