The return of big deals
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After a protracted cold patch, IT sector acquisition activity intensified in September 2009 and billion-dollar deals were back on the menu
The month saw computer maker Dell announce its intention to acquire global IT services company Perot Systems for $3.9 billion, a move that shadows HP’s 2008 acquisition of EDS. Both acquired companies share a founder in former US presidential candidate Ross Perot.
Dell’s announcement came just three weeks after the company revealed yet another disastrous set of financial results, cementing the analysis that it is now almost impossible to operate a global hardware manufacturing business without a significant IT services capability.
Shortly after the deal was announced Reza Saleh, a former EDS employee who now works for an investment vehicle linked to Perot Systems, was accused by the Securities Exchange Commission of making $8.6 million by trading on insider information relating to the acquisition. Saleh was one of the leading characters during the daring rescue of detained EDS executives in Iran in 1979.
Another hardware and services tie-up followed shortly after when manufacturer Xerox acquired IT services and business process outsourcing provider ACS for $6.4 billion. According to reports, the sale follows a five-year hunt by ACS CEO Darwin Dearson to find a suitable owner. Dearson, who is also a former employee of EDS, will pocket about $800 million in cash and stock from the deal.
Mixed messages
Also in September, Adobe Systems, developer of such ubiquitous document creation tools as Acrobat and Photoshop, announced its intention to acquire web analytics vendor Omniture for $1.8 billion in a remarkable departure from its comfort zone.
Omniture is one of the leading vendors of marketing-friendly web analytics tools, which fits well with Adobe’s largely non-IT user base. Adobe also has some visibility with web managers and content creators, thanks in part to its 2005 acquisition of Macromedia, which brought with it the popular multimedia platform Flash. Cross-selling to these web developers the tools to analyse how people view their creations is plausible, and Adobe certainly needs the boost, having been hit hard by the downturn.
Meanwhile, Omniture’s business is growing quickly but the company has consistently lost money for many quarters. This makes it ripe for the cost cuts and synergies that should theoretically follow an acquisition.
Meanwhile, network equipment manufacturer Cisco acquired Norwegian video conferencing supplier Tandberg in an attempt to broaden the appeal of its unified communications solutions. The $3 billion cash deal solidifies Cisco’s heavyweight status in video conferencing: its offerings range from the online conferencing tool WebEx to a high-end telepresence system, installations of which can fetch more than $300,000.
