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Honey, I Shrunk the Tech Sector: M&A Alters the Game

Stocks in this article: CSCO

Back in the good old days, there was a degree of certainty about the tech sector. Companies like Cisco (CSCO) and Hewlett-Packard (HPQ) could partner knowing that one essentially touted networking gear and the other sold servers and software. The Google (GOOG) CEO could even sit on the board of Apple (HPQ) with barely a raised eyebrow . Not any more, though.

The recession has been the catalyst for a major tech shake-up, turning long-standing buddies into enemies and prompting acquisitions that would have been greeted with incredulity just a couple of years ago. Whether Cisco's entry into the server market, or Oracle's (ORCL) surprise acquisition of Sun Microsystems (JAVA), the tech market is undergoing a rapid transformation. The big question is -- who will be the winners and losers?

"There have been a few big tectonic shifts that have happened," Ron Gruia, an analyst at Frost & Sullivan told TheStreet.com. "When Cisco announced their UCS (Unified Computing System), that was the first one of the big moves that have happened."

Small Cap Tech Plays




With IT budgets tightening and companies becoming ever more global, tech executives are looking to reduce the number of suppliers they deal with. As a result, tech companies are on an M&A and partnership tear.

"There's going to be more of that because there's still the drive for single-source IT buying in CIO offices," said Martin Tobias, a partner at Bellevue, Wash.-based venture capital firm Ignition Partners. "The more things they can buy from one company, the happier they are."

Among the recent notable tech-deal news:

  • Oracle bought Sun Microsystems
  • IBM bought SPSS
  • EMC bought Data Domain
  • Radware bought Nortel's Alteon switch business
  • Rackable Bought Silicon Graphics
  • Broadcom attempted, unsuccessfully, to buy Emulex
  • Speculation has linked NetApp with more M&A
  • Dell is reportedly planning a "significant acquisition" possibly in storage or services
  • Tech Talks Tough

    As for the sector's winner and losers, the VC feels that it will all come down to execution, rather than the nuts and bolts of technology.

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