Buying Spree, The Sequel: Why Not IBM/Sun, Google/Twitter, Microsoft/Anyone?
About 10 days ago, BoomTown posted a piece titled, “With a King’s Ransom in Cash, Why Is There Still No Buying Spree in the Tech Space Yet?”
Noting the big cash hordes being held by a plethora of giant tech and Internet companies and their strong cash flows too, even in the midst of the economic meltdown–I wondered when the mergers and acquisitions would ever begin.
The answer is two-fold: No one wants to buy when prices could just keep going down. And no one wants to sell at all-time lows.
Another issue? While public companies have a market value, as low as they might be, noted a prominent Internet player, the bulk of tasty private ones no longer have a set price, since there have been no sales of late.
Well, that just won’t do! So, in the interest of jump-starting the economy–I mean, there are investment bankers out there running low on caviar and Dom, folks!–here are three suggestions for interesting deals.
IBM Buys Sun:
I mean someone has to buy Sun Microsystems (JAVA)–now hovering in the $5-a-share range with a market valuation of just $3.62 billon–right?
But it’s not going to be Hewlett-Packard (HPQ), despite a deal announced just yesterday in which HP will distribute and provide support for Sun’s Solaris operating system on a line of HP servers.
Analysts dismissed the deal as meaningless in terms of true revenue, with one noting that it did not mean HP would buy Sun either, especially for its server business, because of redundant hardware products.
That leaves, according to many observers I spoke to: IBM (IBM), which competes with Sun in the server business too. Many think the products fit better together, and IBM has a $115.3 billion valuation, so the purchase would be doable.
The server business is sucking wind, according to a report earlier this week, due to the global economy, so finding safe harbor for Sun is something Wall Street seems to be looking for.
Of course, Sun CEO Jonathan Schwartz curiously did use the term “Live Free or Die” in his blog post about the HP deal yesterday–although he was not referring to Sun’s independence, but noting that the phrase was “synonymous with software independence, innovation and intellectual property freedom.”
Google Buys Twitter:
A lot has been written about the supposed “threat” of Twitter to all Web, media and communication companies in the known universe. (How we are all scared by a start-up whose name is so flighty is a question for another day.)
I am not so much convinced, although Twitter certainly is on a roll from a hype and growth perspective.
And I do understand why Twitter–flush with venture funding and an allegedly low burn rate–might want to bide its time to see what happens and not sell out too early.
But while the hot microblogging service declined to sell to Facebook, it might want to reconsider if Google (GOOG) or Microsoft (MSFT) or a big telecom company comes calling with, say, a $1 billion check.
Why? Simply because Twitter–while it says it is poised on the verge of announcing its grand plan to make money–is operating in an arena I have seen many other shooting stars in, traversing a very dangerous crevasse of hype and expectation.
Due to that, it has a very big red target on its back, one that a competitor in the status space–such as the spurned Facebook, whose update business is much bigger–will not ignore.
Right now, Twitter could ask for a lot, as one of the only Web 2.0 companies that everyone is uniformly excited about.
It might want to think about how such excitement can turn rather quickly. Digg–which was almost bought by Google–might give them some advice on how quickly the winds change, for example, as can many too many others.
Microsoft Buys Anyone:
With its $20.7 billion in cash and still casting about for a really bold Internet strategy–sources tell me that newly installed digital head Qi Lu just wrapped up a meeting-rich look-see at the path ahead, including a day-long session on Super Bowl Sunday–Microsoft really should stop futzing around with the PowerPoints and jump right in.
It already has an investment in Facebook. While the social-networking phenom might not be for sale, one wonders if a $10 billion offer and a promise of autonomy might not be well-considered at Facebook’s Palo Alto HQ.
Or what about the social-networking/communication assets of AOL and its low-margin advertising business, with owner Time Warner (TWX) keeping the media part of the unit? Rival Google actually wants to keep that AOL search business, so sticking it to that company would be an added bonus.
As to the continual flirting with Yahoo (YHOO), it is getting to be as annoying as Chuck Bass and Blair Waldorf’s persistently unconsummated roundelay on “Gossip Girl.”
But, of course, once again this week, Microsoft CEO Steve Ballmer said he was interested (sort of, but not), while Yahoo’s CFO Blake Jorgensen said Yahoo was too (sort of, but not).
Said Ballmer at a strategy gathering: “They have share. We don’t have share. They have a huge team. We’ve got a much smaller team….I’m hoping that’s a reasonable conversation to have with new management at Yahoo.”
Said Jorgensen at an investor’s conference: “We’re not opposed to doing a deal…[but] it’s extremely difficult to draw a line down the middle of the organization and split it into two pieces.”
Dear Steve: Yahoo is the only way Microsoft is ever going to gain the share it so covets, and it looks like new CEO Carol Bartz is at least showing that Yahoo does not have to be roadkill.
Dear Carol: Get while the getting is good because 20 percent is still pretty weak, compared to Google’s 70 percent, and competition is only going to get pricier.
And even though Ballmer could not resist and made a jibe at former CEO Jerry Yang–with whom he famously tangled in the botched acquisition attempts–noting “I don’t want to be known as the Jerry Yang of this market,” everyone knows these two crazy kids belong together.
So kiss, please, declare your undying affection and intent to stick it to Google, and pronto, so we can all move onto the next episode.