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"Mergermania" Isn't Just Back - It's Back With a Vengeance

Oracle Controls Retek, CA Snags Concord: Who'll Be Getting Hitched Next?

When in October of last year I asked the rhetorical question "Is Mergermania Back?" (JDJ, Vol. 9, issue 10), there wasn't much doubt that it already was, but it took until last month to truly demonstrate just to what extent. It's not just back; in March we saw it's back with a vengeance.

IBM has gobbled up Ascential ($1.1 billion) and - SAP's attempts to do the same notwithstanding - Oracle just snagged Retek ($643.3 million), a much smaller deal than its January takeover of PeopleSoft ($10.6 billion), but a significant one nonetheless.

Its industry significance was underlined by the CEO of Retek, Marty Leestma, who was crystal clear why ERP arch-rivals SAP and Oracle had both pursued his company so keenly, and said so: "This is the first time in 15 years that there hasn't been a new game-changing technology out there, and that's driving this consolidation," he said.

In Leestma's view, everyone in the industry struggles with how to grow when there's no push coming from new technology. In the case of a company like Oracle, it clearly has the opportunity to leverage its very high profit margins and fund growth-by-acquisition using its cash hoards. So where Retek has just gone, who's to say Lawson Software, Siebel Systems, or BEA Systems won't shortly follow?

Question one for April then is: Who'll be getting hitched next?

After that comes the inevitable question two: Which mergers/takeovers will be the first to be unpicked? Who'll be the first to the divorce court? At the time of my original "Is Mergermania Back?" commentary, you may recall, Dr. Adam Kolowa, CEO of Parasoft, sounded a word of caution, asking us to remember Compaq buying DEC or HP buying Compaq - successive takeovers that Kolowa felt had both failed. "They brought more headaches than they were worth to the companies that were involved in them," he declared.

Which in turn begs the obvious third question: Who's right? The giants like HP or Oracle who seek to grow ever bigger (or SAP, who surely won't let their defeat by Oracle over Retek blunt their enthusiasm for some other quarry sometime soon); or those who remain independent, the way that - say - Sun seems determined to do?

Back in October, JBoss CEO Marc Fleury commented: "Consolidation is a natural fact in the software markets" and went on to note that the mergers and consolidations might well be catalyzed by the recent rise of open source software. "Open source accelerates this natural consolidation by putting great pressure on the profits of infrastructure software players," Fleury commented.

Like Leestma then, Fleury sees mergermania not so much in terms of winners and losers. Rather it's a function of efficiencies at play.

But what about Leestma's observation that "there's no push coming from new technology"? Is he right on the money there? Or is there still life in the old i-technology dog yet, with innovations such as Flash video for example about to rip in 2005 through the WWW - an almost classic "disruptive technology" in the precisely the game-changing sense Leestma believes is absent from enterprise software?

Disruptive technologies are usually introduced to the market by small start-up enterprises, not giants like Oracle and SAP. So an agile player like Macromedia can potentially run rings round the industry, and Clay Christensen's predictions may come very true, with Flash video gaining a strategic foothold that allows Macromedia over time to move up-market through performance improvements until it finally displaces all market incumbents and becomes the sole purveyor of quite simply the only way to deliver streaming video over the Web, just as we have been demonstrating recently at SYS-CON.TV.

Back to mergermania though. At this writing, telco rivals Qwest and Verizon both still want to conjoin with MCI, an $8.5 billion or a $6.7 billion deal depending on who wins - a little smaller than Oracle-PeopleSoft, but even so. Which suggests that April will turn out to be every bit as lively as March has been - perhaps even more so, if the focus moves from telecommunications back to enterprise software.

We can all confidently expect substantial ongoing M&A activity then. It's only really a question now of when? and who? Get ready for the next wave of announcements!

More Stories By Jeremy Geelan

Jeremy Geelan is Chairman & CEO of the 21st Century Internet Group, Inc. and an Executive Academy Member of the International Academy of Digital Arts & Sciences. Formerly he was President & COO at Cloud Expo, Inc. and Conference Chair of the worldwide Cloud Expo series. He appears regularly at conferences and trade shows, speaking to technology audiences across six continents. You can follow him on twitter: @jg21.

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Most Recent Comments
BungH 04/09/05 06:37:05 AM EDT

+++ Neither HP nor Compaq was able, back in '02, to survive independently over the long term. They were both equally ill equipped to deal with changes in the tech marketplace. +++

Not to mention other troubles: the Equal Employment Opportunity Commission is suing Hewlett-Packard in a Houston federal court for allegedly demoting a white man and replacing him with a less experienced black woman.

Reverse discrimination.

Disagree 04/09/05 05:51:37 AM EDT

prEdictshun commented on 9 April 2005:
]]] After that comes the inevitable question two: Which mergers/takeovers will be the first to be unpicked? Who'll be the first to the divorce court? [[[
HP will demerge from Compaq, for starters. In 2005.

No way Jose. Neither HP nor Compaq was able, back in '02, to survive independently over the long term. They were both equally ill equipped to deal with changes in the tech marketplace.

prEdictshun 04/09/05 05:43:04 AM EDT

]]] After that comes the inevitable question two: Which mergers/takeovers will be the first to be unpicked? Who'll be the first to the divorce court? [[[

HP will demerge from Compaq, for starters. In 2005.

more M&A combos 04/08/05 08:52:08 AM EDT

}}} 3M will merge with Goodyear and issue forth as MMMGood.

Zippo Mfg., Audi Motor Car, Dofasco and Dakota Mining will merge to become, of course, ZipAudiDoDa. {{{

Five more:

* Hale Business Systems, Mary Kay Cosmetics, Fuller Brush, and W.R.Grace Co. will merge and become Hale, Mary, Fuller, Grace.

* Polygram Records, Warner Bros, and Zesta Crackers join forces and become Polly, Warner Cracker.

* Fairchild Electronics and Honeywell Computers will become Fairwell Honeychild.

* Grey Poupon and Docker Pants are expected to become Poupon Pants.

* Knotts Berry Farm and the Nat'l Organization of Women will become Knott NOW!

Clyde Noel 04/08/05 06:13:17 AM EDT

Too many companies are competing for the small amount of spending in the industry. Look for a reshaping of Silicon Valley companies, new venture capitalists and more ghost buildings.

Consolidator07 04/08/05 04:13:51 AM EDT

..[from the article] Back in October, JBoss CEO Marc Fleury commented: "Consolidation is a natural fact in the software markets"..

So...does Fleury think someone will soon snap up JBoss? If so who?

Jason 04/08/05 04:06:46 AM EDT

+++Two4One commented on 8 April 2005:
If Microsoft merged with Google you could have Googlesoft.+++

With Google's popularity, knack for hiring top notch talent, ability to get products out of the gate, their billions and a large loyal following, you have to wonder how many engineers at Microsoft are working on their resumes as we speak.

Two4One 04/08/05 03:57:48 AM EDT

||| Mergermaniacs commented on 8 April 2005:
Wasn't it Mark Ehrlich who used to do those spoof M&As? Here are three I can remember:
3M will merge with Goodyear and issue forth as MMMGood. |||

If Microsoft merged with Google you could have Googlesoft.

MOGlover 04/08/05 03:06:48 AM EDT

Maybe SCO will merge with G2News?

Mergermaniacs 04/08/05 02:26:59 AM EDT

Wasn't it Mark Ehrlich who used to do those spoof M&As? Here are three I can remember:

3M will merge with Goodyear and issue forth as MMMGood.

Zippo Mfg., Audi Motor Car, Dofasco and Dakota Mining will merge to become, of course, ZipAudiDoDa.

Federal Express is expected to join its major competitor, UPS, and consolidate as FedUP!

Buying Spree 04/08/05 01:50:19 AM EDT

Look out for more Microsoft acquisitions anytime soon. Yankee Group in '04 predicted it would be of BEA ("Why Microsoft Should Buy BEA Systems," by Dana Gardner) but the game has moved on. Small and often, not one big spree. MS is taking on merged Symantec-Veritas in the security space, and to do that it is certain to have to keep on hoovering up security start-ups.

bullwink7 04/07/05 04:30:50 PM EDT

||| M&A commented on 7 April 2005:
And just today we have CA snapping up Concord |||

Another lousy acquisition - Money losing business for $330 million cash

back to the future 04/07/05 04:27:48 PM EDT

Interesting how the new president & ceo John Swainson is leading CA straight back into the M&A world they once knew so well..

M&A 04/07/05 04:14:19 PM EDT

And just today we have CA snapping up Concord Communiations.

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