Vendors spent nearly $12.2 billion last quarter to buy technology companies
in the third quarter as storage, business intelligence and grid computing
sectors rocked with action, according to the latest research from The 451
Group. Going forward, the research firm expects grid computing to lead the
next fresh wave of M&As.
The Q3 figure was down some 24 percent from the quarter a year earlier,
which saw $16 billion spent on mergers and acquisitions. Moreover, Q3
spending declined 21 percent from Q2, which may hint at a weaker quarter,
but The 451 pointed out that this figure is skewed by First Data Corp’s $7
billion purchase of Concord EFS, a transaction that sent Q2 M&A spending
rocketing skyward.
“Despite a firming in many technology acquirers’ stock prices — normally a
key predictor of aggressive acquisition behavior — buyers remained
cautious, spending most of their dollars on mid-market properties and for
the most part avoiding multi-billion-dollar deals,” The 451 said in its
report. “Acquirers valued the average Q3 transaction at $85 million, versus
an average of $125 million in the previous quarter, with the median Q3 deal
coming in at about $17 million.”
But whatever the reasons for the year-over-year or Q2 to Q3 dip folks in the
storage, grid computing and utility computing segments had reason to be
encouraged by a few blockbuster deals, and several mid-market purchases. A
burst of consolidation at the peak of Q3 spurred eightfold growth in M&A
spending within the storage and business intelligence software sectors,
while the grid computing niche has made about $1 billion in M&As in the last
year.
The M&A breakdowns are as follows: companies spent $2.8 billion on Net
infrastructure; $2.5 billion on applications software; $2.1 billion on IT
services; and $1.9 billion on storage acquisitions. The rest occurred in
telecom an miscellaneous IT categories.
In the storage area, acquirers spent eight times more than they spent in the
entire first half of the year to acquire 10 storage hardware and software
companies. Storage systems giant EMC took the grand prize when it purchased
data archiving specialist Legato Systems for $1.3 billion, while Symantec
just last week spent $150
million on PowerQuest to greatly bolster storage management technology.
July proved to be the reigning month of business intelligence software
action, as acquirers spent about eight times what they shelled out in the
first half of the year, spending nearly $1 billion on nine properties.
Business Objects moved to acquire
Crystal Decisions for $820 million in a blockbuster deal, while Hyperion offered
$142m in cash for Brio Software. Actuate followed
less than a week later by buying Nimble Technologies.
Although the storage and business intelligence sectors are considered
evolving segments, they may have matured a bit owing to the mass
consolidation.
The 451 sees the next big raft of purchases coming in the grid computing
space, which is rapidly heating up due to the proliferation of utility, or
on-demand services that accompany the technology. IBM, HP and Sun
Microsystems are the largest systems vendors to descend upon this new space,
with EDS, Veritas and Computer Associates throwing their hats into the large
ring.
“For example, in the grid computing arena, where all of the major IT
suppliers have made serious bets on being able to deliver “on-demand”
computing, we expect that in many cases these vendors will turn to alliances
or acquisitions to execute against those strategies,” The 451 report said.
“The critical factor about Grid computing technologies is whether or not
Grids can break out from the scientific and technical world into
commercially-oriented enterprises,” The 451 Group Chief Analyst John Abbott
told GridComputingPlanet*. “High-performance computing users don’t
mind rolling up their sleeves in order to get something working, and their
software tends to be suitable for breaking into discrete pieces that can be
executed in parallel. Enterprise users running transaction processing
applications have different requirements and prefer off-the-shelf technology
that works predictably every time. Grid technology is on the cusp of the
transition – but hasn’t quite made it yet.”
To be sure, the grid and utility computing arena saw three transactions in
Q3 and has generated more than $1 billion in M&A activity within the past 12
months, according to a separate
report from The 451 Group.
In August, Intel purchased
Pallas GmbH while Sun Microsystems nabbed
CenterRun for $66 million and Pirus Networks and TerraSpring before that.
Earlier in the year, IBM bought
Think Dynamics for $48 million.
