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Thats' a fairly logical conclusion to draw, as many of the biggest names in tech are sitting on mounds of cash. Companies like Apple (Nasdaq:AAPL), Amazon (Nasdaq:AMZN), Cisco, EMC (NYSE:EMC), Google (Nasdaq:GOOG), HP, IBM (NYSE:IBM), Intel (Nasdaq:INTC), Microsoft (Nasdaq:MSFT), Oracle (Nasdaq:ORCL) and others have a total of $270 billion in cash at their disposal, and with a fair amount of stocks still trading at reasonable valuations, these tech giants could decide to go shopping.
With so much cash lying around and plenty of willing buyers and sellers, a new wave of M&A activity could be starting right now in Silicon Valley, so let's have a look at which companies may be buying and which want to sell.
| Cisco Systems |
Cash Position: $37.9 billion |
YTD return: 45% |
| EMC Cash |
Cash Position: $8.4 billion |
YTD return: 60% |
| Microsoft |
Cash Position: $36.7 billion |
YTD return: 50% |
Always Looking for a Deal
Cisco Systems, the world's largest maker of networking and routing gear, is an investment banker's dream come true. Simply put, Cisco is one of the most acquisitive companies in America, and the company lived up to that reputation in October, by acquiring Denmark's Tandberg for $3.4 billion and Starent Networks (Nasdaq:STAR) for $2.9 billion.
At the end of October, Cisco had about $35 billion in cash and cash equivalents and a $5 billion bond offering to mostly offset the previously named acquisitions, giving Cisco about $38 billion to play with, and there are plenty of potential targets.
Polycom (Nasdaq:PLCM), a maker of video telecom products, is one name that has been mentioned for a possible marriage with Cisco. Israel's Alvarion (Nasdaq:ALVR) and Qlogic (Nasdaq:QLGC) are other names that have bounced around in the past as partners for Cisco, but in both cases, those rumors are now several years old.
Cisco could choose to bolster its position in networking, where it is the obvious leader, by picking off rival Juniper Networks (Nasdaq:JNPR) or it might be able to get Brocade Communications (Nasdaq:BRCD) for a song. Brocade has been searching for a suitor for over a month, and HP's takeover of 3Com could make the company vulnerable. While it's hard to pinpoint exactly who will be the next recipient of Cisco's overtures, one thing is certain and that is Cisco is never done shopping.
A Buyer or a Seller?
EMC is the king of the data storage space and strengthened its position there by acquiring Data Domain earlier this year. EMC had about $8.4 billion in cash at the end of September and if it sold its stake in VMware (NYSE:VMW), EMC would have close to $17 billion to go shopping with. Several years ago, rumors circulated that IBM may be a suitor for EMC, but this marriage of acronyms never came to be.
EMC's market value of $34 billion makes it an unlikely takeover target, but that doesn't mean it won't be looking for its own targets. The company has been loosely mentioned as a possible buyer for Brocade. CommVault Systems (Nasdaq:CVLT) is storage firm that EMC could probaly get at a reasonable valuation. Data provisioning firm 3Par (NYSE:PAR) might also make sense and EMC could buy 3Par for a decent price, as well.
Looking to Get Bigger
Microsoft is already the world's largest software maker, but if it goes shopping, it will probably be for a company that can help it wage a more successful battle with Google. Obviously, a true takeover with Yahoo (Nasdaq:YHOO) never materialized, but the companies do have a search partnership. Microsoft also owns a piece of Facebook, but an outright takeover doesn't seem likely. At least not in the near term.
Akamai Technologies (Nasdaq:AKAM) might be a good fit for Microsoft and there have rumors that Google might be interested in Akamai, and that alone could spark Mr. Softy's interest. Blackberry maker Research In Motion (Nasdaq:RIMM) is another name that has been tossed around recently as a possible target for Microsoft. Obviously that would only heighten Microsoft's already bitter rivalries with Apple and Google.
Another potential candidate may be Citrix Systems (Nasdaq:CTXS) because Microsoft already sells some Citrix systems. Either way, Microsoft's cash stash, which is roughly $40 billion, is robust to say the least and puts a lot of potential targets in play.
The Bottom Line: Shopping Season is On In the Valley
Without the benefits of a crystal ball or more investment banker friends, we don't want to hazard a guess as to what the next tech marriage is going to be, but we do know that all of this cash won't go to waste, and that means the big tech firms are likely to get bigger, and do so soon.
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