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Potential Acquisition Targets For Cash Rich Tech Companies
By: iStockAnalyst | May 18, 2010 | Stocks: AAPL, AMZN, BBI, CSCO, GOOG, HPQ, MSFT, PALM, RIMM, YHOO,
The large US technology companies have managed to augment their cash reserves by over 40% in the past year, taking the quarter of a trillion dollars. Extremely conservative management of the balance sheet, in the midst of an economic crisis surrounded by uncertainty, have resulted in a massive build-up of spare liquidity. The ten largest tech companies added more than $65 billion to their reserves since the beginning of the economic slump.
Some targets for these cash rich tech companies look incredibly promising and a successful M&A transaction has the capability of producing unfathomable synergies.
Microsoft ( MSFT) CEO Steve Ballmer has repeatedly talked about his interest in buying Research In Motion ( RIMM). The combo makes sense given both companies strong presence in the enterprise market, but an acquisition would come with a hefty price tag given the fact that RIM comes with a $36 billion market cap. Reportedly, Ballmer didn't want to tie up with PALM  : 5.69, 0, which was eventually bought by HPQ : 24.82, -0.21. Furthermore, Microsoft has been actively engaged in a dialogue with social game developer CrowdStar – which may be valued at $200 million. Millennial Media, which analysts estimate could possibly net as much as $500 million in a deal with Microsoft, is another prospective target for the software giant.
There are quite a few budding tech firms in the market just waiting to be preyed upon by the big players in the industry.
3 of the most significant acquisitions for Yahoo, Microsoft and Google are as follows:
VMware
VMware offers a host virtualization products that put the Microsoft portfolio to shame. From virtualized applications to infrastructures, VMware has a solution to help organizations get the most out of their hardware and maximize their IT assets. If Microsoft can't beat them, it would be more prudent to just buy them.
iBlue
With Yahoo email, instant messaging and games already a mainstay on mobile phones, the acquisition of iBlue would make Yahoo! the immediate leader in mobile advertising and more relevant than it's been in quite some time.
Rackspace
It would be perfect for Google ( GOOG : 527.41, 5.92) to swallow Rackspace, which has been busy expanding its product line seizing other firms. Rackspace, which is a major threat to Amazon's cloud superiority, could provide Google with the leverage to compete with Amazon ( AMZN : 199.93, 7.88) and make a meaningful impact in the industry.
Apple ( AAPL : 383.35, 9.5), on the other hand, has its eyesight on chip designer ARM Holdings, the Cambridge-based firm, whose microchips can be found in most of the world's mobile phones, including Apple's iPhone. The deal would likely cost Apple more than £3bn. Part of the reasoning behind the Apple rumors is that as smartphones get smarter, they will need more of Arm's designs.
Valve's Steam game distribution service for Mac is available now and officially introduces the Mac to a gaming environment only PC owners could enjoy so far. Conceivably, Steam for Mac has huge implications for gaming on the Mac and a deal with Valve could help Apple gain market share in this space too. With more than $23.1 billion in cash, Apple has plenty of money to keep purchasing small start-ups. A would-be acquisition in wireless payments is Vivotech Inc., a Santa Clara, California-based maker of technology that lets users wave their phone by a cash register to pay for items.
The overall consensus is that 2010 could be a huge year for acquisitions. Rumors are running wild that Amazon will snatch up Blockbuster ( BBI : 0.15, -0.0276), Hulu and Netflix ( NFLX : 222.02, 6.17), in addition to speculation that Cisco might buy EMC and F5 Networks.
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