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Business Management

Merger Mayhem and a New World Order in ICT

The technology news aggregator site Techmeme this morning is studded with takeover news as the ICT sector seems set for another outbreak of M&A fever. Let’s look at some of the themes emerging and what they mean.

Pac-Men. Like the hungry creatures of the ancient arcade game there are always those companies gobbling up smaller rivals for technology, people or user bases. The Pac-Men are particularly active when spurred on by rivals. Hence the fact that both Dropbox and Box, the Tweedledum and Tweeledee of the ‘xBox’ online storage/collaboration space, are at it again. While Box was buying Streem, a tiny but much-hyped startup out of the hallowed Y Combinator stable, it was reported that Dropbox was snaffling Parastructure, a Big Data infant that hadn’t even come out of stealth mode. Expect more fishing for minnows when these companies (and many others like them) make their long-awaited IPOs and have the funds to buy bigger.

Conquistadors. When a market declines, is saturated or simply isn’t offering the growth wanted by shareholders, moving into an adjacent market can be attractive. Hence, SanDisk, best known for micro storage, buying Fusion-io for $1.1bn, to accelerate its move into the hot, very hot in fact (ouch, it’s really hot) datacentre storage space that is being transformed by Flash, new file systems and fabrics.

Machiavellians. An unattractive corner of the M&A landscape is in buying companies to win not only great technology and people but also intellectual property that can then be used against rivals. The news that Nuance may be for sale will be scary stuff for the mobile and embedded equipment world. Nuance is the go-to maker of voice/speech programs and as such acts as a sort of Switzerland for a small, critical part of the technology stack needed by makers of phones, tablets, cars and others. If Nuance went to a private-equity company, no problem, but if, as the Wall Street Journal suggests is possible, it went to Samsung or another giant then things could become very convoluted as the big companies seek to ensure they are covered for every eventuality. Think of what happened, for example, when Oracle got Java by buying Sun Microsystems.

Cisco CEO John Chambers is one of the most experienced deal makers of his generation. Just last month, he predicted “brutal consolidation” as the “musical chairs” (rough game, that) of the sector get occupied by new faces and the weak are eaten alive. As the old guard see revenue drying up from their old cash cows and as a series of massive trends reshape our ICT future, he’s probably right.

But a gaudy M&A spree can be negatively disruptive, leaving CIOs with torn up product roadmaps and new reps and terms to deal with, while consumers suffer at the hands of corporate lawyers defending IP turf.

Change is likely coming but what’s not known is how benevolent that change will be for ICT buyers and consumers.

 

Martin Veitch is Editorial Director at IDG Connect

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Martin Veitch

Martin Veitch is Contributing Editor for IDG Connect

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