December 2004 was a stellar month for acquisition activity with several sector-changing events including Lenovo’s buyout of IBM’s PC division, Oracle’s consummation of its PeopleSoft takeover and Symantec’s acquisition of Veritas.

But on a smaller but still significant scale, there is an equal hunger for acquisitions by companies keen to broaden their IT industry product and services coverage.

UK support services giant Serco moved to strengthen its interests in IT services, reaching an agreement to buy troubled public sector outsourcer and systems integrator ITNet for £235 million ($441m).

ITNet, which was originally created with the spin out of Cadbury Schweppes’ IT department in 1995, has established a strong portfolio of clients in the public sector. That is also the main area of focus for Serco, although its support services cover a vast array of activities including the management of air traffic control, prisons and local education authorities. Despite the boom in government spending, ITNet has struggled in recent times: in 2004 it lost its prized contract to host the UK Cabinet Office’s website amid accusations of failing to meet key targets in a deal worth £83 million.

Elsewhere in the UK, regional telecoms provider Kingston Communications also strengthened its services capabilities through the acquisition of network system integrator Omnetica for £169 million ($317m). Industry watchers had questioned whether Kingston itself might become a takeover target, but the addition of networking, storage and security skills will give it more diverse sources of revenues.

Network equipment vendor 3Com, which has been in decline for the best part of a decade, tried to reverse that trend in December with the acquisition of one of the security industry’s hottest properties. With its $430 million takeover of TippingPoint, it gets a vendor of network-based intrusion prevention systems with revenues of $32.6 million that are expected to double in 2005.

Some analysts still think that there is plenty of room for smaller players though. Neon Systems, which competes with the much larger IBM in the mainframe integration software market, bought up ClientSoft, a vendor of integration software for .Net, Java, and web services applications into legacy systems. The deal “signals Neon’s desire to provide an alternative to IBM in the area of high-performing systems mainframe customers,” says Dale Vecchio of Gartner.