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Santa's Bag of Tech Mergers

By Cynthia L. Webb
washingtonpost.com Staff Writer
Friday, December 17, 2004; 9:43 AM

'Tis the season for mergers, as technology firms go on a buying binge this holiday season that is starting to rival the great M&A spree of the 1990s.

First it was Oracle finally scooping up PeopleSoft. Then Sprint and Nextel combined to form a new wireless giant. Yesterday brought official news that Symantec is spending a whopping $13.5 billion to purchase security firm Veritas -- creating the world's fourth-largest software company.

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While these mega-deals drew most of the headlines, other A-list tech players were out shopping as well. The world's still-largest software company -- Microsoft -- said yesterday that it has purchased a small New York-based anti-spyware firm, Giant Company Software Inc. -- a move interpreted as a sign that Bill Gates & Co. isn't prepared to let Symantec dominate the security sector.

And then there's eBay, which today announced it is buying Internet real estate site Rent.com for a reported $415 million.

So 2004, Bloomberg concludes, will go down in the books as a historic year for mergers and acquisitions: "Companies have spent $576 billion on takeovers since the start of October, the most since the second quarter of 2000, when $761 billion of acquisitions were made, data compiled by Bloomberg show. Mergers are picking up as stock markets recover and global economic growth gathers pace. The Standard & Poor's 500-stock index is the highest since Aug. 3, 2001. World economic growth is projected to expand 5 percent this year, the fastest in three decades, the International Monetary Fund forecast in September."
Bloomberg via The Washington Post: Merger Activity Tops In Four Years

The Los Angeles Times ran its own piece this week on the flurry of merger activity, writing that the "corporate takeover spree is signaling a new aggressiveness on the part of U.S. executives, who suddenly appear less concerned about the economy or about making strategic missteps." More from the LAT: "The latest wave of takeovers, and expectations of more to come in 2005, helped to push a key index of blue-chip stocks to a three-year high on Monday. But as corporate deal making ramps up, so do worries that business consolidation will mean more lost jobs in an economy still struggling to generate healthy employment growth. Experts say a confluence of factors is driving the surge in deals. Many firms are flush with cash after deep cost cutting in 2001 and 2002 helped profits soar. Rebounding share prices since 2002 also have given companies more spending money in the form of their own stock."
The Los Angeles Times: Corporate Optimism Sparks Wave of Deals (Registration required)

Sizing Up Symantec

Case in point is the Symantec's all-stock deal for Veritas. "The deal, which is expected to close in the second quarter of next year, will give the combined company revenue of $5 billion next year. Only Microsoft, Oracle and SAP, a German-based competitor, would have greater software sales. Capping a week that began with Oracle's acquisition of PeopleSoft, a maker of business software, Symantec's acquisition of Veritas is part of a larger consolidation trend in corporate software, driven by the need to cut costs and provide a bundle of products. The merger would create a one-stop provider of tools for data storage, security and management, which have become increasingly critical to businesses," the New York Times said. (Most news organizations pegged the Symantec-Veritas deal as creating the world's 4th largest software concern, though the Los Angeles Times and San Francisco Chronicle dubbed it the fifth, factoring in IBM).
The New York Times: Symantec to Buy Veritas Software in Deal Worth $13.5 Billion (Registration required)

The San Francisco Chronicle noted the obvious: "Industry leaders and analysts say the software field has matured, leading to the inevitable consolidation of that market." But this nugget from the paper is more telling: "The deal also broadens Symantec's business, about half of which is focused on the consumer market, where analysts say it faces a possible challenge from Microsoft." Jim Geronaitis, vice president of Computer Associates International's storage management division, told CNET's News.com: "This is the largest software acquisition in history. And both of the companies are trying to integrate their previous acquisitions, so the new company is going to be hard-pressed to bring anything else into the organizations for some time to come." (Check out CNET's Q&A with Symantec chief executive John Thompson.)
The San Francisco Chronicle: Symantec Agrees To Buy Veritas For $13.5 Billion
CNET's News.com: Rivals Hope For the Worst For Symantec

More from the AP: "Even as the stock market puzzled over why Symantec decided to branch outside computer security to buy a slower-growing company in Veritas, some analysts praised the deal for creating a more diversified firm better equipped to compete with the likes of Microsoft and IBM. With the Veritas purchase, Cupertino, Calif.-based Symantec hopes to create a one-stop shop that guards against computer viruses and ensures the reams of vital information stored on corporate networks remain accessible. Both specialties are in high demand as computer hackers become more proficient in exploiting flaws in Microsoft's Windows operating system, and computers become the indispensable information hubs of businesses and households alike."
The Associated Press via The Seattle Times: Symantec To Acquire Veritas In All-Stock Transaction (Registration required)

More deals are ahead in the software sector, according to Piper Jaffray & Co. analyst David Rudow. He told The Los Angeles Times: "This is just the beginning. Companies in the fragmented industry are joining together as growth in software sales remains sluggish. Veritas, in particular, has languished."
The Los Angeles Times: Symantec Agrees To Buy Veritas (Registration required)

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