Technology acquisitions during a recession?

Since of late we see lots of big corporations buying out other companies. The first question that comes to mind is, are they crazy? Why would anyone spend millions of dollars at a time when people are trying to “save” money.

So let’s think from an “Oracle” point of view about who made close to 10 acquisitions in the past year. With the markets falling, the “price” of a company goes down with it. In other words companies are for purchase at a lesser price. Usually the idea behind an acquisition is to either to expand and use the new technology and gain more revenue or to wipe out a competitor.

Here’s an abstract view as to how Oracle went about acquiring companies. Oracle, with sales of $22.4 billion in fiscal 2008, is the largest business-software maker in the world, dominating the market for industrial-strength databases that companies rely on to organize everything from inventories to payrolls.
The company first started buying during the last tech bust, in 2003, when its CEO, Larry Ellison, predicted tech companies would have to merge and diversify to survive. He followed that with a string of big acquisitions.

Oracle bought PeopleSoft, a maker of human-resources and financial software, followed by a few more companies. Its last sizable purchase was BEA Systems Inc. in January 2008. In 2008, Oracle zeroed in on much smaller firms.

The timing is good. Prices for small tech firms have fallen sharply. As companies run out of cash, they are going to sell for whatever they can get and in some ways Oracle has become one of the few lifelines for small software makers.

Acquisitions are a part of Oracles culture and are now faced with a big problem - there are no more good companies to purchase. Who would be their next victim, is a question I would love to ponder on.
2009 has already seen some major acquisition activity, such as Oracle’s purchase of Sun Microsystems Inc. for $7.1 billion, Broadcom Corp.’s hostile quest of Emulex Corp for $764 million and NetApp Inc that it was seeking to acquire Data Domain Inc for $1.5 billion.

Bargain-rate valuations and hopes of economic recovery are enticing cash-rich tech firms to seek acquisitions, with many expecting a string of such deals during the rest of the year. So watch out for news flashes of mergers and acquisitions.

One thing is for sure - there is still plenty of money to go around!

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