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Tech M&A: Security Targets to Watch

Stocks in this article: MFE ARST FIRE SNWL WBSN

NEW YORK ( TheStreet) -- Even as IT spending kicks off to a slow start following the recession, M&A in tech is definitely not dead.

Analysts expect tech's major players, including IBM (IBM), H-P (HPQ) and EMC (EMC) to continue with the buying spree they started last year. What they're looking for in 2010: security firms, a sector led by the likes of McAfee (MFE).

"To all the stacked dominators -- the large guys like Oracle (ORCL), Microsoft (MSFT) and Cisco (CSCO) -- security, which is very relevant to their software and network infrastructure offerings, is a top priority," says Don More, a partner with New York investment bank Updata Advisors. "More and more of them are realizing that security and system maintenance should be in the same box."

More points specificially to H-P, which he says "lacks the core capability" of security expertise that would benefit the firm on its software side.

In terms of targets, McAfee has long been rumored a good buy for large tech firms, despite its $6.24 billion market cap that makes it an expensive grab. McAfee reported better-than-expected results for the fourth quarter, reporting revenue of $525.7 million, up from $424 million in the same period last year and well above analysts' forecast of $514.81 million.

Also a potential target is ArcSight, IT security's rising star, which sells devices for monitoring security threats across data centers.

Read on for two less familiar security firms rumored to be potential acquisitions.

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