Technology mergers and acquisitions have soared since 2002, with buyers worldwide spending US$1.2 trillion to acquire nearly 14,000 companies in hardware, software and telecommunications, according to The 451 Group and its mergers and acquisitions KnowledgeBase, a database of technology deals. Technology and telecom acquisitions in 2006 totaled $409 billion -- more than similar deals of 2002, 2003 and 2004 combined. In the first quarter this year, 20 deals exceeded $1 billion, while just 10 did so in last year's first quarter. But the most significant deals aren't necessarily the most expensive. Here are three technology mergers whose resulting products promise to have lasting influence in the enterprise.
Who bought what: Cisco nabs WebEx When: Announced March 15; closed May 25 Value: $3.2 billion
Business plan: Cisco has kept WebEx's management team, led by CEO Subrah Iyar, intact while making the acquired company the centerpiece of its collaborative software group. The WebEx team reports to Don Proctor, a Cisco senior vice president.
Cisco is intent on making WebEx's hosted collaboration services, including Web conferences and video conferences, integral parts of Cisco's unified communications strategy. Through the integration of WebEx meetings and IP phones, for example, users now can launch a WebEx meeting on a PC simply by clicking a button their Cisco IP phones. More integration is planned in the coming months, but WebEx users can still access the Web-based services even if they don't have Cisco devices.
Why this IT deal matters: Cisco is now a hosted applications service provider for the first time. The move shores up Cisco's competitive position against Microsoft and its Live Meeting product, with WebEx holding 64% of the Web conferencing service market, says Claire Schooley, an analyst with Forrester Research. Cisco gains access to small and midsize businesses through WebEx, while conversely the acquisition gives WebEx inroads into larger markets, she adds.
Behind the scenes, Cisco is integrating WebEx with its unified communications products, from instant messaging and IP phones to the TelePresence video conferencing service. "Cisco is working on making it seamless to go from one kind of collaboration to another," Schooley says.
Some WebEx customers welcomed the acquisition, saying it would spur more innovation. But Cisco must be careful not to disrupt WebEx's large customer base. Too much integration with Cisco products will "start limiting [WebEx] and Microsoft meeting will just jump right in the middle and take over," says Ken Cooper, president of the Dallas/Fort Worth Cisco Users Group and a WebEx user.
Who bought what: Citrix Systems grabs XenSource When: Announced Aug. 15; closed Oct. 22 Value: $500 million
Business plan: XenSource CEO Peter Levine, now the head of Citrix's virtualization and management division, reports to Citrix CEO Mark Templeton. Citrix has rebranded XenSource's server virtualization product line with the name Citrix XenServer, but says it has kept XenSource's product support staff in place and will not diminish support provided to the newly acquired company's 1,000 customers. The next major change will come in the first half of 2008, when Citrix starts shipping XenDesktop, a desktop virtualization product that will combine Citrix and XenSource technology.
Why this IT deal matters: Citrix's buy lends "significant financial and marketing muscle to XenSource" in its bid to compete with virtualization market leader VMware, says Nemertes Research in a report on the acquisition. In turn, fiercer competition will lead to more innovation in virtualization technology, the research firm says.
XenSource may have saved itself from a cloudy future by being acquired, says Brian Gammage, a Gartner analyst. It had an interoperability agreement with Microsoft, but the deal had little long-term value because Microsoft will offer its own server virtualization offering, Hyper-V, as part of Windows Server 2008 due out in February. Being acquired actually brings XenSource closer to Microsoft, Gammage notes, because Citrix and Microsoft have partnered on application delivery and thin-client technology. The deal's success, however, may come down to how aggressive Microsoft is with Hyper-V, he says.
Who bought what: HP acquires Opsware When: Announced July 23; closed Sept. 21 Value: $1.6 billion
Business plan: Opsware CEO Ben Horowitz now runs HP's Business Technology Optimization (BTO) software division, which also includes the Mercury Interactive business HP acquired last year in a $4.5 million deal for IT management software and services. Horowitz reports to Thomas Hogan, senior vice president of software.
The Opsware and HP support teams have been merged, company officials say. Don't expect major product changes, because technology overlap between HP and Opsware is minimal. But HP says it is tightly integrating the Opsware software and HP's configuration management database, all aimed at driving errors out of IT automation.
"All of the BTO software will have access to all of the configuration information that is created across the entire portfolio, including Opsware," says David Gee, vice president of marketing for software at HP. Specific product changes will be announced over the next few months, he adds.
Why this IT deal matters: The deal pressures other big vendors, including HP rival IBM, to acquire data center automation capabilities. But with Opsware off the market, the price for remaining acquisition targets will likely go up. HP/Opsware came amid a flurry of data center automation buys. BMC Software purchased run-book-automation vendor RealOps in July, a few days before HP's move to buy Opsware. EMC followed suit in October by purchasing Voyence, a maker of network change and configuration management software.
So who's next?
BladeLogic is an enticing target, as it is the most similar to Opsware among vendors still on the market, and could claim to be worth as much as the $1.6 billion HP shelled out, says David Williams, a Gartner analyst. Like Opsware, BladeLogic's forte is server provisioning. "If BladeLogic does get acquired, anybody that doesn't have that capability will probably have to build it," Williams says. "This is not a trivial task. This is something Opsware and Bladelogic have spent a lot of time doing. This is not something that can be rushed to market with any shortcut."