Will Tech M&A Help CIOs?
Scan the tech news headlines each day, and you're sure to find a new salvo in Microsoft's unsolicited bid for Yahoo.
As the takeover battle brewed, we took a look at the potential for a new round of tech-sector buyouts, highlighted by the idea that the most likely buyers are the same old big-names in technology.
Now, a new Wall Street Journal story shows how many tech companies have stashed their cash as the economic downturn looms on.
The story largely theorizes that the sector is hording cash to stave off any downfall from the struggling economy. And rightfully so: as the story states, "Technology companies are considered among the first to experience upturns or downturns in the economy, and their earnings—with first-quarter financial results being reported this week and next—are expected to get weaker before they strengthen."
But there's another angle to the cash build-up: the bigger the war chest, the greater the opportunity to make strategic buys in a down market. "It's a buyer's market," the story quotes Marv Burkett, CFO of chip maker Nvidia, as saying. That echoes what Brenon Daly, a financial analyst with the 451 Group, told me in our recent story.
But there's a bigger question at hand for CIOs: what will any future consolidation mean for your strategy?
Over the years, we've seen plenty of "good" M&A, where the acquiring company (usually a big fish) gobbles up a smaller firm with little or no interruption of product development or customer service. But not all transactions go so well: numerous tech firms have botched particular buys, leading to customer defection that only strengthens the competition they hoped to crush.
So what's the story, CIOs? Tell us in the comments section below.