NEW YORK. (
) -- Software, cloud services and networking ... Let the tech M&A activity heat up.
"This year is critical because the market is so high and so many of the stock prices are at very lofty levels," Joel Achramowicz, senior vice president of research at investment bank Blaylock Robert Van, told
. "It's a good time to be using equity for transactions."
Storage ranked high on the M&A list last year, marked by
$2.2 billion acquisition of
, and Dell's
, although software looks set to be a big trend in 2011.
"I expect software to continue to be a big driver of consolidation across the industry," said Charles King, principal analyst at research firm
. "Despite its success, HP has some notable holes in its software/middleware portfolio (pointing to a singular blind spot of former CEO Mark Hurd, and one which I expect new CEO Leo Apotheker was hired to correct), so I expect the company to be an active player. "
"We believe M&A activity will shift from storage to data center management software and networking in 2011," said Jayson Noland, an analyst at Robert W.Baird, in a recent note. Possible software targets include network management firm
, email marketing specialist
and customer relationship management (CRM) outfit
, according to the analyst firm.
Robert W.Baird believes that Solar Winds would be a good fit for IBM, HP, or
could be a possible suitor for Constant Contract, along with
Right Now would sit nicely with
, it said.
In the hardware market Robert W.Baird sees security firm
as a likely target, continuing the M&A buzz around the company. Fortinet, which competes with
Check Point Software Technologies
, pushes its FortiGate appliance as a sort of Swiss Army knife for network security: it combines firewall, antivirus, VPN and intrusion prevention systems.
With cyber threats increasing, Fortinet has already been
as a potential target for HP, IBM, Dell and Oracle. Boosted by strong results, however, the company's stock has risen more than 148% in the last 12 months, although its $2.87 billion market cap is still well within the reach of tech's biggest hitters.
Other corners of the tech sector are also heating up. Managed hosting/cloud services have seen some action already this year, with
Time Warner Cable
for $230 million.
Other candidates in this space include
, according to Brenon Daly, senior M&A analyst at The 451 Group. "You could certainly make a defensible case for Rackspace and Internap as acquisition targets, because of their positioning," he told
. "Rackspace has a solid cloud business and Internap also has a content delivery network (CDN)."
Rackspace shares popped last year on chatter about a possible Dell merger, and Daly thinks that
Level 3 Communications
would benefit from buying a CDN player such as Internap or even
best known of the CDNs
, which provide services for delivering data over the Web, is
, although its $8.8 billion market cap would make it a pricey acquisition. Internap and Limelight Networks would be cheaper alternatives, according to Daly.
Blaylock Robert Van's Achramowicz, however, has a slightly different take. "The two companies that come to mind
for acquisition are Akamai and
," he told
. "Akamai has been doing content data management for a long time."
The analyst acknowledges that Akamai would be a pricey deal, but says that the firm would still be a good purchase for the likes of IBM or HP.
Riverbed, which makes products for improving traffic across Wide Area Networks (WANs), is one of
and its technology is seen as key for companies consolidating their data centers and building cloud infrastructure.
"There has been a lot of talk about Riverbed -- they are a great company," said Achramowicz. "I think that somebody like a Dell or a HP would find them interesting, even someone like an
because of their data storage focus."
--Written by James Rogers in New York.
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