The latest buzz in the Technology industry and the Technology mergers and acquisition (M&A) market is the 3PAR deal. With the slow but wary signs of the economic recovery, it seems that the Technology M&A sector has a lot more expendable equity capable of some rotation in the market around compared to the other sectors such as Oil and Gas,
One of the major deals earlier in the year 2010 was Hewlett Packard (HP) acquiring the once market-leader and now struggling phone maker Palm. HP closed on $1.2 billion acquisition of Palm, sending a clear indication about HP’s business diversification plans in the smart phone industry. Apart from the Smartphone’s Palm had several webOS patents which made it unique and an attractive deal for take-over in its struggling stages. The webOS system was a good fit for the touch tablet operations, better than Android, and HP has the capability to capitalize on Palm’s technology without the input from Intel or Microsoft.
Moving from the technology and diversification, the next M&A wave of news that hit the market was a $7.7 billion deal of Intel taking over the security and anti-virus giant McAfee. Analysts say the deal, the latest in a flurry of high-premium acquisitions, could give the world’s largest chip maker a leg up as it competes against a growing field of rivals designing technology to power Smartphone’s, tablet PCs and newfangled televisions Reuters. In this deal, McAfee stock surged a 57.1% premium.
The latest and most discussed acquisition lately is the Dell and HP tug-of-war to acquire 3PAR.3PAR Inc. together with its subsidiaries, provides utility storage systems in the United States and internationally. The saga commenced with Dell’s bid to buy 3PAR for $1.15 billion which was 87% premium to 3PAR’s then market value. After that, HP entered the party topping Dell’s bid for $1.7 billion and this counter offering continued. It looked like two sleazy guys in a bar jockeying for the attention of one shy girl. Finally, after ten days after Dell’s initial bid, HP made the latest in series and came out as a winner to acquire 3PAR for $2.4 billion. This leaves the acquisition of 3PAR at a whopping 182% premium than its market value. Analysts have been studying this M&A process closely and do not rate it very high in business sense. Dell and H-P have a long history of competing over computer sales and executives. But the war over Internet-based data-storing seems a little out of step with reality. According to Shaw Wu, an analyst at Kaufman Bros., this war between Dell and HP has gotten to a point where it seems to be emotional and when it gets emotional, it doesn’t necessarily lead to the best business decision.
This makes me wonder whether all these Technology M&A deals with such high premium buyouts are good business strategic decisions or not. Is this a base/foundation to bolster the future of Technology sector or is this yet another series of bad investments which will drag the future down the drain…
There are some more imminent deals on the horizons or atleast rumors for some major buyouts with Apple Inc., to take over Cirrus Logic, Inc. (a chip and high-precision analog integrated circuits maker for several companies such as Apple, Bose Audio, etc). If this falls through, it would be interesting to see the amount of premium for the buy-out as the stakes on this one are already high.
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