Clouds With a Golden Lining: Enterprise Software Targets

Microsoft's (MSFT) $26.2 billion acquisition of LinkedIn (LNKD) has piqued already high expectations for technology consolidation in the second half of the year. Salesforce.com (CRM) , which lost the LinkedIn bidding but was able to pick up Demandware  (DWRE) for $2.8 billion, and others are among a field of strategics that have been aggressive buyers. Joining them have been private equity stalwarts such as Vista Equiy Partners, Thoma Bravo, Acel Partners and KKR. Meanwhile, companies outside of the immediate sector -- giants such as Cisco Systems (CSCO) and General Electric (GE) -- are looking to enterprise software.

Hovering over this mix of buyers is the ultimate power in the technology space, Alphabet's (GOOGL) Google, a dominant factor in search, mobile and other consumer-focused applications with an appetite to do even more. 

Evercore ISI analyst Kirk Materne has noted that software acquisition activity tends to occur six to nine months after a trough in the S&P 500, which occurred in February. If the pattern holds true, merger activity in the software sector in mid-August to October could make the dealmaking climate before it look like a mere windstorm. Cybersecurity firms such as FireEye, Fortinet and Imperva could be appealing as reduced valuations and increased fraud could present an alluring combination.

There follows below a list of possible targets and a review of what their most appealing attributes are. It's time to reconsider these candidates, because since a February trough and through the subsequent redo very in many stocks, buyers and sellers have had time to reset their prices.

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