SILICON VILLAGE

Saturday, March 28, 2009

Is Infosys eyeing acquisitions in the US?

Indian software major Infosys Technologies Ltd expects to find acquisition opportunities in the US during the downturn, co-chairman Nandan Nilekani was quoted as saying.

"Acquisitions will definitely be very accessible in this market from a price point of view," Nilekani told the Wall Street Journal in an interview. "If it makes sense, we'll do it."

Companies that operate in the healthcare and pharmaceuticals sectors might make particularly interesting targets, he said, adding that Infosys has $2 billion in cash and no debt.

In the interview, Nilekani reiterated Infosys's earlier guidance of about 12 per cent revenue growth for the fiscal year ending March 31. That would be a sharp deceleration from growth of 35 per cent, as measured by the US accounting rules, in the year ended March 31, 2008.

Nilekani told the Journal that potential customers are holding back both because of the economic crisis and a rise in protectionist sentiment.

On the economic crisis, Nilekani said "I've never seen this level of lack of clarity." He said executives are "more focused on short-term tactical issues" than making bigger decisions about outsourcing.

In response, Nilekani said Infosys is working with customers on alternative payment arrangements, including some that would link fees to business results. Other customers are asking to pay on a per-transaction basis, rather than a lump sum for a system.

Nilekani said rising protectionist sentiment in the US also is affecting customers' decision-making about outsourcing.

The economic stimulus bill, for example, includes a provision preventing participants in the US' financial bailout programme from hiring workers with H-1B visas, which are commonly used by the non-US outsourcing companies.

"Political issues have become more pre-eminent in our conversations," he added.

Partly for that reason, he told the journal that he does not know whether more the US firms will lay off domestic workers and move more jobs to India, as International Business Machines Corp plans to do, Nilekani said.

Agencies

Agilent to layoff 2,700

Agilent Technologies Inc said it will lay off 2,700 workers and halt share buybacks as the scientific-instrument maker struggles with a huge drop in demand.

The company expects revenue in its electronic-measurement segment to drop 30 per cent in fiscal 2009 -- the lowest level in its 10-year history.

Revenue in its chip and board test segment is expected to fall 50 per cent from the 2008 level, and 65 per cent from its peak volume.

Agilent is cutting annual costs by $300 million in its electronic-measurement segment and by $10 million in its chip and board test segment.

The company will also suspend share buybacks for the rest of its fiscal year, which ends in October.

The 2,700 layoffs bring the number of employees who have been laid off since December 2008 to 3,800, spokeswoman Amy Flores said, marking a 20 per cent cut in workers since the end of last year.

The moves entail cash costs of about $160 million. “Business remains severely depressed, and there are no prospects for a meaningful recovery in the foreseeable future,'' Chief Executive Bill Sullivan, said in a statement released by the company.

Agencies

Toshiba to take over 100 percent of Panasonic LCD JV

Japan's Toshiba Corp plans to take a 100 per cent stake in its struggling liquid crystal display (LCD) joint venture with Panasonic Corp, a source with knowledge of the matter said.

Toshiba Matsushita Display Technology, currently owned 60 per cent by Toshiba and 40 per cent by Panasonic, is the world's second-largest maker of small and midsized LCD panels used in cell phones, car navigation systems and other devices.

Toshiba has decided to buy Panasonic's 40 per cent stake for several billion yen, the source said, confirming an earlier report in the Nikkei business daily.

No one at Toshiba or Panasonic, formerly named Matsushita Electric Industrial, was immediately available for comment.

The source spoke on condition of anonymity because the deal has not yet been made public.

Hit by falling prices and sluggish demand, Toshiba Matsushita Display is expected to post an operating loss of 30 billion yen on sales of 270 billion yen for the financial year ending this month.

Despite the earnings downturn, Toshiba still views the small and midsize display business as an important business and taking a 100 per cent stake will allow it to accelerate decision-making and restructuring, the source said.

Toshiba is planning to cut costs by 300 billion yen in the next business year from April as it braces for its worst-ever annual loss in the year ending this month.

At the same time the deal should allow Panasonic, the world's top maker of plasma TVs, to focus more of its resources on large displays, though it will still hold 25 per cent in another small and midsized LCD venture majority-owned by Hitachi Ltd.

Toshiba Matsushita Display held 10.3 per cent of the global market for small and midsize LCDs in 2008, second only to Sharp Corp's 20.2 per cent share, the Nikkei said, citing figures from research firm DisplaySearch.

The move will mark the latest realignment of the LCD sector.

Earlier this month NEC Corp said it would close a LCD plant in Japan while Sony Corp and Seiko Epson Corp announced that they were considering an alliance in small-sized LCDs.

After making the venture wholly-owned, Toshiba plans to scale back production of amorphous silicon panels, which have been hit hard by sliding prices, and focus on higher-end polycrystalline silicon panels, the Nikkei said.

Agencies

Friday, March 27, 2009

Has Spice Corp pulled out of Satyam bid?

Noida based BK Modi promoted Spice Corp has pulled out of the bid process for Satyam 'at least for the moment'. The company cites non-transparency as the reason for pulling out. "We are pulling out of the Satyam bid at least for the moment.

We have sent a letter to the Satyam board and former Chief Justice SP Bharucha, who is supervising the bid process. The bid process should have been in line with the order of the Company Law Board," said a company top executive overlooking the bid.

The company was reportedly unhappy over Satyam board not disclosing the names of other shortlisted bidders and making the auction 'open'. It was also not happy with the fact that the second round includes another ‘closed’ technical evaluation' post the one which has already happened post EoI submission.

"As it is only a few bidders are left, what constrains the company from not making the auction process public for the benefit of all shareholders?," the executive added. The company spokesperson however added that Spice might relook at their decision if Satyam makes the bid process 'open and transparent' as advised by CLB.

April 9 is the last date for submission of financial bids for shortlisted players. Spice, L&T and Tech Mahindra are amongst a few bidders shortlisted to participate in the second round.

Economictimes

GobalLogic expands Bangalore centre

GlobalLogic Inc, the leader in global product development services, has expanded its newest centre in Bangalore.

LumenData, an innovative product company specializing in data management, has partnered with GlobalLogic for product development and implementation.

"We feel privileged that LumenData has chosen GlobalLogic as its partner to expand its presence in Bangalore," said Peter Harrison, CEO of GlobalLogic.

"GlobalLogic seeks only highly skilled engineers with several years of experience to join its global team. The centre in Bangalore is critical to our recruitment efforts in India. It's an important technology hub that gives us access to a pool of highly talented engineers," he said in a statement here today.

GlobalLogic has engineering centres in Eastern Europe, Israel, China and the US.

It helps software product companies innovate. In contrast to many firms that focus on IT services, GlobalLogic specializes in product R&D for emerging and established companies.

Agencies

IBM-Sun talks on merger to extend beyond a few weeks

IBM's talks to acquire Sun Microsystems Inc are continuing and may extend beyond next week, according to a person with knowledge of the matter.

IBM is still examining Sun's business as part of its due diligence process, said the source, who was not authorized to speak about the talks and therefore requested anonymity.

Neither IBM nor Sun has issued any statement to say they are in talks, although sources said last week that the two sides are negotiating a merger that would bolster IBM's high-end server and software business.

The Wall Street Journal reported on March 18 that IBM could pay as much as $8 billion for Sun, amounting to a 100 percent premium for the high-end server computer maker. If a deal is sealed, it would be IBM's largest acquisition.

The source said on Thursday that IBM's due diligence process, or examination of Sun's business, was necessary considering Sun's size and complexity.

An IBM spokesman declined to comment, and Sun was not immediately available.

Some analysts have said Sun would bolster IBM's position against rivals like Hewlett-Packard Co and Cisco Systems Inc, both of which have been acquiring smaller, niche technology firms to broaden their product and service offerings.

Agencies

Search engine major Google to improve search facilities

Google has its globally popular Internet search service to understand relationships between words, as the company bids to better grasp what Web users are looking for.

Along with taking into account intended meanings of search terms, Google beefed up results pages with longer snippets in summary paragraphs focused on what people appear to be seeking.

"We're deploying a new technology that can better understand associations and concepts related to your search," Google search quality team technical lead Ori Allon and snippets team engineer Ken Wilder wrote in a blog post.

"We are now able to target more queries, more languages, and make our suggestions more relevant to what you actually need to know."

Internet search services have traditionally been based on matching key words typed into query boxes with words at websites or in other online data.

There has been growing interest in "semantic searches" that are smart enough to go beyond simply matching words to understanding what sentences or combinations of words mean.

A longstanding concern has been whether companies will be able to implement technology that can process the increasingly complex searches with the high speed that Internet users have come to expect.

Microsoft recently confirmed it is testing a Kumo.com semantic search engine it hopes will be more popular than its Live Search service that has long been mired in a distant third place behind Yahoo and market leader Google.

Google on Tuesday rolled out semantic search capabilities in 37 languages. Examples given by Wilder and Allon included a search in Russian for "fortune-telling with cards" yielding search results that included "tarot" and "divination."

A Google search in English for "principles of physics" triggers suggestions to inquire about "big bang" and "quantum mechanics."

Agencies

Thursday, March 26, 2009

Is bankrupt Nortel giving away $7.3 m as bonus?

A Canadian court has allowed eight senior executives at Nortel Networks Corp to share in the bonuses that the telecom equipment maker plans to pay out even as it fights for survival in bankruptcy protection.

Bankruptcy courts in both the US and Canada will allow Nortel Networks to pay as much as $7.3 million in incentive bonuses to the executives.

Nortel already had court approval to pay out a total of $45 million in bonuses for close to 1,000 executive and non-executive employees.

Friday's ruling by the Ontario Superior Court makes the eight senior executives, who do not include Chief Executive Mike Zafirovski, eligible to receive a share of this money, company spokesman Mohammed Nakhooda said.

In addition to the $45 million, Nortel has a separate quarterly bonus plan in place for "the vast majority of employees at all levels," he added.

Nortel -- North America's biggest maker of telephone gear -- had argued in an earlier court report that the bonuses were needed because "the commitment and retention of key employees will be essential to the execution of a restructuring of Nortel".

Executive compensation has become a hot-button issue with investors and politicians alike, particularly amid revelations that US insurance giant American International Group (AIG) paid out $165 million in bonuses after receiving $180 billion in government aid.

Some companies, including all of Canada's large banks, have introduced nonbinding shareholder votes on executive compensation in a bid to provide greater transparency and more accountability.

Toronto-based Nortel filed for bankruptcy protection in January, blaming the economic crisis for derailing a turnaround effort that began in 2005.

It had about $2.4 billion in cash when it sought protection and about $4.5 billion in long-term debt.

Nortel shares were unchanged at 10 Canadian cents on the Toronto Stock Exchange on Friday. In mid-2000, at the height of the company's success, they were worth more than C$1,100 each, adjusted for a stock consolidation that took place in 2006.

Agencies

Deadly PC virus -- Conficker C -- to strike on April 1

A security expert has cautioned that an Internet worm, called Conficker C, can strike at infected computers around the world on April 1.

Conficker C is a sophisticated piece of malicious computer software, or malware, that installs itself on a PC hard drive via specially written web pages and then conceals itself on a computer.

Graham Cluley, of the security specialist Sophos, has claimed that Conficker C is programmed "to hunt for new instructions on April 1".

However, "this does not mean that anything is going to happen, or that the worm is actually going to do anything. Simply, it is scheduled to hunt a wider range of websites for instructions on that date," The Times quoted him as saying.

And the biggest catch is that no one yet has any idea what exactly Conficker C is programmed to do.

In February, Cluley said, "It's as if someone is assembling an army of computers around the world, but hasn't yet decided where to point them."

Experts are fearing that on April 1 all the world's millions of infected computers may receive simultaneous instructions to attack, or to flood the Internet with spam email.

Ed Gibson, Microsoft's chief security adviser for the UK, was quite hesitant to make predictions about Conficker's behaviour.

"April 1 is a classic date for anything like this to go off. But I really would hate to say that April 1 is going to be unlike any other day," he said.

Agencies

IBM to layoff 5,000 jobs in US; While expand in India, China

IBM will cut about 5,000 jobs in the United States, adding to similarly large cuts in the past few months, sources with knowledge of the matter told media.

The job cuts will account for over 4 per cent of IBM's US workforce, which totaled around 115,000 at the end of 2008. The sources, who were not authorised to speak publicly on the issue, said the cuts will mostly be in IBM's global services business, which includes outsourcing and consulting services.

An International Business Machines Corp spokesman declined to comment. The company, which had a total workforce of 398,455 as of end 2008, has not disclosed how many jobs it has cut so far this year, but has said it was making "structural changes" to reduce spending and improve productivity.

IBM, which now earns around two-thirds of its revenue from outside the United States, has been expanding its workforce in emerging markets like India and China.

At the end of 2008, employment in the BRIC countries -- Brazil, Russia, India and China -- totaled around 113,000.

IBM has been hit by slower US technology spending, although it has fared better than many rivals thanks to its global footprint and a decreased emphasis on hardware sales.

A month ago, IBM affirmed its full-year forecast of $9.20 earnings per share, and said contract signings for its business services had grown so far this year.

IBM is in exclusive talks to buy Sun Microsystems Inc, according to sources familiar with the matter, a move that would create a clear leader in the high-end computer server market.

Agencies

Wednesday, March 25, 2009

Will Infosys-Telstra deal cause job losses in India?

Bangalore-based software giant Infosys will pick up most of IBM Global Services’ multi-million dollar applications support contract with Australian software giant Telstra, after the latter’s deal with the former was scrapped following telco reducing its outsourcing partners from four to two.

According to The Australian, the decision to shift from IBM to Infosys could result in hundreds of job losses locally and in Bangalore, where IBM operates outsourcing centres.

IBM GS staff was told the scratching of the vendor’s software support would represent about 50 per cent of its one billion dollar, six-year deal with Telstra, signed in early 2006.

Telstra’s decision to drop IBM was a big surprise to IBM GS staff, who expected the contract to continue until 2012.

The deal was lost not because of performance issues but because Infosys low-balled the IBM offer, sources said.

Telstra has been reviewing its IT outsourcing contracts with Satyam, EDS, IBM GS and Infosys since last year, when the telco announced it would trim its list of major IT suppliers from four to two in an effort to reduce costs and streamline its providers.

Earlier, Telstra had ended one of its information technology outsourcing contracts with International Business Machines Corp (IBM). It has now roped in Infosys Technologies for the same.

IBM Global Services' multimillion dollar applications support contract with Telstra has been scrapped as a result of the telco reducing its outsourcing partners from four to two, as per an Australian media report.

The decision to shift from IBM to Infosys could result in hundreds of job losses locally and in Bangalore, where IBM operates outsourcing centres, the report said.

The Australian reported that IBM staff were told the scrapping of the vendor's software support would represent about 50% of its $1 billion, six-year deal with Telstra, signed in early 2006.

Less than a week ago, Telstra terminated its IT outsourcing contract with fraud-hit Satyam Computer Services. Telstra is the second major Australian company to do so after The National Australia Bank decided in February to suspend future work with the Indian outsourcer since the disgraced Indian outsourcer's accounting scandal came to light.

The IBM India spokesperson could not be reached for comment while the Infosys communication person said, "We are in our silent period and will not be able to comment on the issue."

Agencies

Amid turmoil Google's top execs keep $1 salaries!

Google Inc Chief Executive Eric Schmidt and co-founders Larry Page and Sergey Brin maintained their traditional salaries of $1 last year even as the value of their combined stakes in the Internet search leader plunged by nearly $26 billion.

The paltry paychecks, disclosed Tuesday in a regulatory filing, come as no surprise because Schmidt, Page and Brin have insisted on their annual salaries remaining at $1 since Google went public in 2004.

The trio also don't get any bonuses or the stock awards that most of Google's other 20,000 employees receive.

That's because Page and Brin, who founded the company in 1998, already are Google's largest stockholders with about 29 million shares apiece.

Page, 36, and Brin, 35, made Schmidt, 53, a major shareholder when they hired him as CEO in 2001.

Schmidt received perquisites valued at $508,763 last year, mostly to cover personal security bills totaling $402,562. Google also paid a total of $106,201 to fly his family and friends on airplanes chartered by the Mountain View, Calif.-based company.

Including his perks, Schmidt's 2008 compensation package edged up 6 percent from 2007 when his package totaled $478,662.

The Associated Press formula is designed to isolate the value the company's board placed on the executive's total compensation package during the last fiscal year. It includes salary, bonus, performance-related bonuses, perks, above-market returns on deferred compensation and the estimated value of stock options and awards granted during the year. The calculations don't include changes in the present value of pension benefits, and they sometimes differ from the totals companies list in the summary compensation table of proxy statements filed with the Securities and Exchange Commission, which reflect the size of the accounting charge taken for the executive's compensation in the previous fiscal year.

Limiting their salaries to $1 didn't seem like a big sacrifice for Schmidt, Brin and Page until 2008. That's because they became multibillionaires as their holdings in Google soared eight-fold between the time of the company's initial public offering in August 2004 and the end of 2007.

Although all three men remain among the world's wealthiest people, they suffered a major setback last year. Combined, their fortunes plunged by a combined $25.8 billion, or nearly 56 percent, in 2008, as investors began to fret that Google would be hurt by the faltering economy.

Google held up better than many people feared as its revenue rose 38 percent to $21.8 billion, but the company's stock price still plummeted from $691.48 at the close of 2007 to $307.65 at the end of last year.

Google shares have rallied along with the overall market recently, closing Thursday at $347.17.

The steep decline in Google's market value prompted the company to recently decrease its employees' cost to exercise a total of 7.64 million stock options. The re-pricing gives the 15,642 who participated in the program a better chance to strike it rich in future years.

Signaling its intent to hand out even more stock options as it expands, Google wants to add another 8.5 million shares to the pool of available awards. The request will be voted on at the company's annual meeting May 7.

Other Silicon Valley billionaires, such as Yahoo Inc. co-founder Jerry Yang and Apple Inc. co-founder Steve Jobs, also have limited their salaries to $1 while serving as CEO.

But mogul CEOs haven't been as egalitarian. For instance, Oracle Corp. CEO Larry Ellison pocketed a $1 million salary in the company's last fiscal year and received an additional 7 million stock options valued at $71.4 million when they were granted.

Agencies

Tuesday, March 24, 2009

Satyam Continues To Lose Major Customers

Satyam Computer Services is on a 'losing spree', having so far lost outsourcing contracts from large customers to rivals such as IBM Corp., TCS, Infosys Technologies and Wipro Ltd. Now, a US property and casualty insurer is seeking to replace its outsourcing contract with Satyam.

US based Selective Insurance Co., which has reportedly outsourced about a quarter of its IT staffing requirements to Satyam, is said to be looking for alternate arrangement in light of Satyam latest woes.

In papers filed with the Securities and Exchange Commission (SEC) last month, Selective is quoted to have said: "We believe we would be able to manage an efficient transition to a new vendor and not experience a significant negative impact to our operations in the event that we no longer retain Satyam in their current capacity due to the financial issues they are currently experiencing."

Satyam chairman Ramalinga Raju on January 7 admitted falsifying the company's cash position by as much as $1 billion while overstating quarterly earnings and revenue by up to 28%. Sources indicate that Satyam may also have faked employee numbers and other data.
Since then increasingly nervous Satyam customers are looking for alternatives in case the scandal-scarred outsourcer is unable to restore internal stability or find a buyer with pockets deep enough to see the Indian company through its current crisis.

Many customers have either completely exited, or are in the process of moving their outsourcing contracts from Satyam to rival tech firms such as IBM, TCS, Wipro, Infosys and Accenture.

Some of the customers, including Telstra, Emerson, Nissan, State Farm Insurance, Applied Materials, Kansas State Bank, and Sony, have either moved out their projects completely, or are in the process of migrating current Satyam work to other outsourcing vendors.

iGATE, which was keenly bidding for the 51% stake of Satyam, has now pulled out from the bidding process mainly due to the loss of Satyam customers. Phaneesh Murthy, CEO of iGATE Corp, said, "We know that there are customer exits happening at Satyam. While the value erosion and the extent of liabilities were a concern, it was the totality of concerns that influenced our decision."

However, some large Indian players like BK Modi's Spice Telecom, Tech Mahindra, and L&T are among the companies to move to the second stage of bidding for the fraud-ridden IT outsourcer.

CXOtoday

Kronos Debuts Workforce Central 6.1 in India

Kronos India has announced the availability of version 6.1 of its Workforce Central suite in India.

Workforce Central 6.1 provides executives with greater visibility into their global workforce, enabling them to identify critical business issues. The new version includes hundreds of features and new enhancements.

Talking to CXOtoday, James Thomas, country manager, India, said, "At Kronos we've developed a unique perspective on what it takes for an organization to successfully deploy a workforce management solution. Our belief is that integrated workforce management in real time doesn't have to be so hard, and that organizations shouldn't have to trade functionality for simplicity. Workforce Central strikes an ideal balance of deep functionality combined with a range of ease-of-deployment, ease-of-use and cost-of-ownership enhancements."

Kronos helps organizations control labor costs, minimize compliance risk, and improve workforce productivity all at the same time centrally in real time, Thomas said. "These are important business issues in normal times, and even more during tough economic times."

Workforce Central 6.1 supports India's Factories Act and Shops and Establishment Act, whereby manufacturers and services organizations are required to maintain time-related registers and statutory reports for employees.

To help organizations comply with these regulations and minimize compliance risk, Workforce Central 6.1 provides legislated working time reports, as well as new features to monitor overtime and time-based pay codes on a daily and hourly basis.

The new enhancements in Workforce Central 6.1 includes: Enhanced ERP integration; Low total cost of ownership (TCO); Complete automation; Global ready; Machine resource tracking and Advanced scheduling.

CXOtoday

iGATE Pulls Out of Satyam Bidding Process

Fremont-based iGATE has decided not to go ahead with the bidding process for acquiring 51% stake in India's scam-tainted Satyam Computer Services (SATYAMCOMP), based on further analysis.

Talking to CXOtoday, Phaneesh Murthy, CEO of iGATE, said, "While there is no one particular reason, it's the totality of concerns like sliding revenues, unknown margins and large liabilities that made us pull out of the race."

Murthy said, "We know that there are customer exits happening at Satyam. While the value erosion and the extent of liabilities were a concern, it was the totality of concerns that influenced our decision."

The company had earlier announced its participation in the bidding process last week, competing against some of the large Indian investors.

However, our PE fund partner had no role or influence in our decision to pull out. We had prepared our own model of financials and in that model it was difficult to get a reasonable return for any investor, said Murthy.

Satyam has been struggling for survival since January 7, when its founder and former chairman, B. Ramalinga Raju, confessed to filling the company's balance sheets with $1 billion in fictitious assets and nonexistent cash.

March 20 was the deadline set by the government-appointed Satyam Board for bidders to respond to the request for proposals the IT firm had sent out on March 13.

Sources indicate that potential bidders are concerned about the lack of clarity about the financial status of Satyam, as well as the implications of the class action suits and other legal troubles that the company is facing.

CXOtoday

Monday, March 23, 2009

Sony freezes salaries, compensations, hikes of employees'

Sony Corp has decided to freeze its workers' salaries for the year starting in April to improve profitability, the financial daily Nikkei said in its Thursday edition.

The paper said workers' bonuses will also be lowered to four months' pay from six months, and annual compensation for managers will be dropped 10 to 20 per cent through wage cuts and 35 to 40 per cent bonus reductions.

"Executives will also be slugged with huge cuts to bonuses and salaries," Nikkei said. Due to the global economic downtown and the strength of the yen, Sony is expected to report a group operating loss of 260 billion yen ($2.65 billion) for the year ending March 31, the paper said.

Agencies

Has HP cut salaries of EDS employees?

Hewlett-Packard Co said it will cut the base salaries of some employees in its EDS business by 10 per cent for the month of April.

The temporary salary reduction is in addition to a company-wide pay cut HP instituted last month.

The salary cut impacts only EDS workers based in the United States and Puerto Rico and will not affect those making less than $40,000.

A company spokeswoman said in a statement via email that the move is a "temporary cost action to keep the organization strong while increasing financial flexibility."

HP bought EDS last year for $13.2 billion. Last month, after the company cut its full-year outlook and posted weaker-than expected quarterly revenue, HP moved to reduce base pay for all its employees, including a 5 per cent cut for most salaried workers.

HP Chief Executive Mark Hurd has stressed the company's commitment to lowering costs. HP is the world's largest maker of personal computers, and second-largest technology services company.

Agencies

Sun Microsystems seen as first salvo in tech battle

Quite a few technology companies could lose their independence in the next year or so as the battle among industry giants IBM, Hewlett-Packard Co and Cisco Systems Inc heats up.

The weak economy notwithstanding, Cisco this week announced its entry into the computer server market now dominated by HP and International Business Machines Corp.

And IBM is in talks to buy high-end server maker Sun Microsystems Inc, sources with knowledge of the matter said on Wednesday.

As these companies deliberately step on each other's toes to search for growth, analysts and bankers say the deals market is warming up with cash-rich tech powerhouses hunting for niche technologies at bargain prices.

Virtualization software maker Citrix Systems Inc, storage company NetApp Inc, and network equipment makers Brocade Communications Systems Inc and Juniper Networks Inc are among those that could catch the eye of tech bellwethers looking to compete in new markets, analysts said on Wednesday.

"If I own 60 percent of a market, maybe I can get to 65 percent, but really, I need a new market," said Peter Bell, a venture capitalist at Highland Capital Partners, of the dilemma that faces maturing tech companies.

Morningstar Inc analyst Rick Hanna agreed: "They're all in the war for increasing the total addressable market."

The biggest tech companies have been trying to become one-stop storefronts for business customers for years, offering software, services and hardware for everything from the data center to the desktop as their own core businesses slow down.

The larger impetus behind any deal making is the advent of two hot trends: virtualization and "cloud computing."

Virtualization software lets businesses reduce space and energy usage in their data centers, while cloud computing technologies let them access applications over the Web. Data centers house computing equipment used by companies.

The "arms race" among companies like Cisco, HP and IBM did not happen overnight, Jeff Bistrong, a technology banker at Harris Williams & Co, an investment banking firm said on Thursday.

HP's purchase of technology outsourcer Electronic Data Systems last year already pit it directly against IBM.

"What's different is we're in a major recession, enterprise values have been significantly diminished," Bistrong said.

Companies held on to their cash in the past few months as they assessed the damage to their business from the recession, said Howard Lanser, a mergers and acquisition analyst at Robert W. Baird said on Wednesday.

But now, the price tags of targets are cheap enough to justify longer-term strategic goals and tech companies that have cash will make the "buy decision," Lanser said.

Cisco has $29.4 billion in cash, IBM has $12.7 billion and HP $11.2 billion, according to recent financial statements.

Bargain Hunting

Companies like Microsoft Corp, EMC Corp and Dell Inc also may seek to own choice pieces of the "cloud," as computing becomes more Web-based.

Microsoft has been bullish on cloud computing, but its grip on data center operating systems could be threatened by the move toward remote data centers, forcing the software maker to search for acquisitions, Morningstar's Hanna said.

Microsoft CEO Steve Ballmer said at a conference on Thursday the company plans to buy up to 20 companies this year, with deal sizes ranging from $10 million to $500 million.

EMC, the world's largest maker of corporate storage, may also look for deals to improve its services offering, analysts said.

EMC itself could get acquired by Cisco; the two companies talked about a deal last year, a person familiar with the matter told Reuters in February.

Analysts said the timing of IBM's move to buy Sun illustrates the partly strategic, partly opportunistic thinking of companies that could drive dealmaking in the next year.

"Cisco has clearly laid out all its cards on the market," said Hanna, referring to the networking giant's plans to sell servers for data centers.

Hanna said he reads the talks as "a preemptive move by IBM to take Sun off the table," to keep rivals like Cisco from getting their hands on a bigger piece of the data center pie.

IBM may be betting that it can do a better job than Sun in taking advantage of these emerging technologies, and use it to compete better against Cisco and HP.

The Wall Street Journal reported that IBM has offered between $10-$11 a share for Sun, the Java software maker, or a total value of $6.5 billion, net of cash.

That's the kind of deal size big companies will be comfortable with as they look to plug holes in their software, services and hardware offerings for enterprises, said Highland Capital's Bell.

Bell, a former chief executive of information storage company StorageNetworks, said small acquisitions were unlikely to satisfy the appetites of large companies.

Rather, companies with market values of between $1 billion and $10 billion would be the focus of acquisitions, he said.

The thinking is more like, "If I can find a larger player, maybe I can accelerate and leapfrog, maybe 12 to 24 months, on my competitor," he added.

Agencies

Total Pageviews