HP, Intel, IBM Spend Too Much, Innovate Too Little - Today's Outrage

All the recent takeover activity by HP, Intel, IBM and so many other technology companies reveals an inexcusable lack of innovation.
Author:
Publish date:

NEW YORK (TheStreet) -- All the recent takeover activity by HP (HPQ) - Get Report, Intel (INTC) - Get Report, IBM (IBM) - Get Report and so many other technology companies reveals an inexcusable lack of innovation.

With so much money to toss around, it's embarrassing that these companies are unable to fund their own research & development. Waiting for another company to create something worth buying is among the most expensive and inefficient ways to grow a business.

Just look at the price tags -- Intel is spending $7.7 billion for

McAfee

(MFE)

and $1.4 billion for

Infineon's

(IFX)

wireless-chip business, HP is now offering $2.06 billion for

3Par

(PAR) - Get Report

(double the original deal with

Dell

(DELL) - Get Report

, which wisely

dropped out of the auction

) and

Cisco

(CSCO) - Get Report

, is reportedly looking to

grab Skype

before an IPO that is expected to value

eBay's

(EBAY) - Get Report

Internet calling unit at $5 billion.

There also are plenty of smaller deals in the making, such as

IBM's $480 million purchase

of marketing software company

Unica

(UNCA)

and

VMWare's

(VMW) - Get Report

, $100 million

takeover of Integrien

, which makes systems monitoring software.

These takeovers amount to an admission of failure by the buyers. Clearly they did not have the foresight or wherewithal to push in these new directions on their own. They let other companies take the risk and now reap the rewards.

As TheStreet's Scott Moritz noted recently, HP's desperate battle with Dell for 3Par is considered an attempt to acquire some of the next generation "cloud" computing technologies that threaten to undercut its own hardware business.

With all its resources, why wasn't HP out in front in the cloud computing movement? While suddenly hot because of all the M&A activity, cloud computing has been gaining momentum for a long time as businesses turn to cheaper virtual computing systems instead of buying more expensive hardware.

Similarly,

Intel's purchase of Infineon's wireless-chip business

reveals how long it took the chipmaker to recognize the trend toward mobile devices that would drive demand for chips. I don't even know what to say about Intel's McAfee purchase other than it suggests that Intel isn't very confident in its future as just a chipmaker, so now it's getting into the software business too. Don Reisinger makes the point that

McAfee may provide Intel with a side door into the mobile market

using the security corridor to finally get in.

Even

Google

(GOOG) - Get Report

, once a powerful symbol of innovation, appears to have lost its way, judging by

Google's acquisition spree in the social media sector.

It's all very sad. Investors should not be encouraged by these acquisitions across the tech industry, rather they should be worried about whether the buyers still know how to create new products on their own.

--Written by Glenn Hall in New York.

>To contact the writer of this article, click here:

Glenn Hall

.

>To follow the writer on Twitter, go to

http://twitter.com/glennhall

.

>To submit a news tip, send an email to:

tips@thestreet.com

.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.