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M&As: What was and What Should Have Been

PeopleSoft's purchase of J.D. Edwards in the face of a hostile takeover attempt by rival software maker Oracle ranked as one the of the most promising acquisitions of the year, according to a mergers and acquisitions analysis service.

In addition to listing five acquisitions it believed would have the most impact on the tech sector, 451 TechDealmaker offered five deals it felt should have gone down but didn't, one of which could have been Cisco's purchase of storage infrastructure provider Brocade Communications Systems.

While it's fun to speculate on what could have been, PeopleSoft left little to the imagination when it bid to acquire J.D. Edwards for $1.75 billion in June, with the idea of becoming the No. 2 player in the applications market to German leader SAP. Little did it know it would open the door to perhaps the most fierce struggle in the enterprise applications market to date.

Four days after PeopleSoft announced its intentions for mid-market provider J.D. Edwards, Oracle threw its own hat into the merger ring, but not for J.D. Edwards. Oracle moved to acquire PeopleSoft in an unsolicited bid that has grown to have a $7.3 billion price tag now with J.D. Edwards as part of the mix.

Oracle said it wanted PeopleSoft to give it a leg up against SAP. A struggle ensued and now the decision rests with the U.S. Department of Justice and European Commission, which are examining competition issues and are expected to issue decisions in early 2004.

TechDealmaker analyst Tim Miller listed Novell's purchase of SuSE Linux for $210 million as another major purchase. In a legal and ethical battle every bit as contentious as the Oracle/PeopleSoft brouhaha, SCO Group has sued IBM, claiming misuse of a Unix software license.

But that hasn't slowed the momentum swirling around Linux, as some expected. Novell also recently registered certain copyright ownership rights to a slew of UNIX System V releases. SCO had previously registered copyrights on some of these. Novell's move was essentially a declaration of war on SCO.

2003 was also a year of increased concern over data management in the storage sector as EMC drove the concept of information lifecycle management (ILM) home repeatedly. EMC's pickup of enterprise content management software maker Documentum was the hallmark of this movement.

EMC is trying to digest virtualization software provider VMware, which would give it, along with it content management capabilities, a unique type of utility computing offering for customers interested in automating and corralling their data at the same time. Those moves followed the successful purchase of data archiving specialist Legato Systems. EMC's strategy has impressed analysts, including the 451's Miller.

"Besides potentially placing its ILM strategy streets ahead of the competition, EMC is breaking all the rules for how a storage company should behave," Miller said in his report. "The Documentum acquisition demonstrates that EMC is willing to take risks to attain and retain market leadership, that it's an industry visionary, a leader and not a follower. It has left its competition struggling to come up with a compelling response."

Another noteworthy deal was Cisco's purchase of Wi-Fi equipment maker Linksys for $500 million in cash created waves in a sector bursting with potential. The deal, Miller said, gives Cisco traction in the after the burgeoning small office/home office (SOHO) market to go with its enterprise-grade portfolio.

Lastly, Miller praised IBM's purchase of Think Dynamics for $48 million for giving Big Blue the automated provisioning and policy-based orchestration it needed to modernize its Tivoli system management suite.

Chief among the acquisitions that should have been, but weren't in 2003 is the notion that Cisco should acquire Brocade to bolster its bid to become the leading storage networking fabric provider, Miller said.

"Brocade was relatively cheap in 2003, and would have instantly propelled the acquirer into a market-leading position (albeit with plenty of baggage) for what to Cisco is small change," Miller said.

But Cisco has the cash and the time to do it in 2004. It also has more choices, with McData as another major storage fabric player in the wings.

TechDealmaker also expected IBM to go beyond its purchase of Think Dynamics to snap up Nuance Communications, a speech recognition vendor. Along with most aspects of the high-tech sector, IBM has long invested in its speech recognition technology, but could seriously boost its market presence over Microsoft by picking up Nuance.

Miller also expected Nokia to buy Open Terra, which has developed a Java-based mobile middleware platform that looks like a fit for what Nokia's Enterprise Solutions Group needs.

TechDealmaker also thinks HP should consider Packet Design to bolster its OpenView network management capabilities with Packet Design's route analysis functions. This would enable HP manage application performance, as well as network infrastructure.

Lastly, the research service also thought IP Unity or Kagoor Networks might be good fits with Siemens, who could round out its softswitch stack. Owning a media controller and a session controller would have given the vendor more hooks into enterprise and carrier accounts, the group said.