Acquisitions galore as market surges
Keith Humphreys forecasts a good year for networking as value of acquisitions grows
We are already half way through 2005 and, if the number of mergers and acquisitions are a bellweather, then we are set for a good year.
In networking there have been 45 acquisitions to date, compared with 42 in the first half of 2004 and 44 in the first half of 2003. Compare this to the heady days of 2000 when there were 116 acquisitions in the first half of the year (12 by Cisco alone).
Cisco currently has six focus areas, or Advanced Technologies, as it calls them; wireless LAN, home networking, IP communications (IPC), security, optical, and SANs. The company stated at its recent European Analyst event its intention to increase this to 14 Advanced Technology groups in its financial year 2006, which starts now. Two of the groups – IPC and security – are already $1bn businesses, 10 are set to reach $1bn, while four expected to be worth $2bn. As Cisco tends to acquire its research and development, what will these new Advanced Technologies areas be?
Rob Lloyd, who ran Cisco EMEA until his promotion to run the new region of US and Canada at the beginning of July, told euroLAN that these acquisitions will be in areas which will drive forward Cisco’s vision of the Intelligent Infrastructure Network.
We understand this to mean that Cisco is heading towards the datacentre, as the acquisitions of TopSpin and FineGround have indicated already.
SAN is an area that is struggling to reach $1bn (even with an acquisition of market leader Brocade it would only reach $800m currently), so the rumour of Cisco acquiring EMC, in early July, had some logic.
Shares in EMC rose by more than three per cent over the 4 July national holiday weekend. Cisco chief executive and president John Chambers has told investors that a big scale merger would never happen, although Cisco has made large acquisitions in the past (see box, above right) but not as large as this potential $40bn acquisition.
Software companies are also acquisitive, with Computer Associates (acquiring NIKU and Tiny) leading the charge followed by BMC Software (OpenNetwork) and then BEA (Incomit). Oracle’s appetite for continued acquisitions is undiminished, considering its spending $10.3bn on PeopleSoft late last year; it has made three acquisitions this year (Oblix, Retek and TimesTen).
Security has seen an intense amount of acquisition activity, with Microsoft (acquiring Sybari), McAfee (Wireless Security), Network Appliances (Decru), and Cisco, which acquired MI Secure and NetSift, adding to the previous security acquisitions of Okena, Riverhead, Perfigo and Protego Networks.
According to research firm Dealogic, the value of global mergers and acquisitions in the first half of 2005 has risen to $1.3 trillion, an increase of 35 per cent compared with the first half of 2004. The Asia-Pacific region saw the largest increase in value, by 57 per cent, mainly because of increased activity in Japan, as China recorded an 18 per cent fall.
Private equity accounted for 15 per cent of global deals and increasedby 80 per cent in the second quarter of 2005, compared with the first quarter.