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Acquisition Action 2012: Microsoft Gobbles Up Yammer, Facebook Snaps-up Instagram

Economically, we still haven’t left the Great Recession behind. It’s everywhere; in every enterprise balance sheet, in every merger and acquisition, in R&D departments on both sides of the Atlantic. That said, it hasn’t really dampened enthusiasm for buy-outs and there were many this year across the entire IT spectrum.

While there haven’t been a huge number of breath-taking deals, like Microsoft’s acquisition of Skype for US$ 8.5 billion, or the Oracle acquisition of Sun for US $7.4 billion that closed at the beginning of 2010, there has still been a lot of activity in all sectors as larger companies look to buy missing technologies, rather than develop the technologies themselves.

The pace of market-change is such that by the time a company has put the money and time into developing a new product, it has already been left behind by others that have bought what they need and moved on.

The merits, or demerits, of this kind of strategy are debatable. It would be quite easy to make a case that this kind of activity stifles innovation, but it would also be possible to argue that it drives the market forward.

A bigger problem for many companies is integrating new technologies into existing technology portfolios, or even worse, developing a strategy for the acquisition that fits the buyer’s world view.

And next year, it’s likely to continue like this. Most companies have renounced big acquisitions for the moment; Larry Ellison said even two years ago that they would be cutting back on the size, if not the amount Oracle would be paying for companies, and, relatively speaking, IBM has only really bought financial minnows this year, even if they are strategically very important for Big Blue.

Out of all the acquisition activity over the year, here are a few that really stood out for us. This is, of course, a personal view, so feel free to suggest your own favorites from the year gone by and we can look at compiling a second review from that. Here they are in chronological order, as it is just about impossible to rank their importance

1. HP, Autonomy

Needless to say, the starting point here has to be the HP acquisition of Autonomy for US$ 10. 4 billion. Agreed that this is not strictly speaking an acquisition for 2012 as the papers were signed in August 2011, but it has only emerged in recent months that there may have been some creative accounting going on at Autonomy. The result is that HP has written down US$ 5.8 billion with at least one investor stating its intention to sue HP for wasting money.

While HP’s fortunes are now considerably worse than they were two years ago, there are signs that the race to the bottom has finally run its course.  HP under Meg Whitman is hoping to put all this behind and build on the IDOL technology even if it looks like the legal cases around this could go on for years.

2. IBM, Green Hat

However, let’s begin at the beginning. While the slow-down in economic activity had been well flagged by the end of 2011, IBM said it was pushing ahead with its acquisition plans that are being fed by a war-chest of US$20 billion.

Big Blue had also announced the appointment a new CEO in the latter half of 2011 in the shape of Virginia Rometty, who didn’t lose any time in explaining to the IBM board and the markets that the acquisition drive was to continue and that 2012 would see more of the activity we had seen in 2011.

Rometty used the acquisition of UK-based Green Hat at the beginning of January to announce that she would carry on as Sam Palmisano her predecessor had and would focus on technologies that would add to their existing portfolio.

Green Hat provides products that enable developers to test applications in the cloud. Like everything cloud-based, the attraction here is the provision of testing capabilities that are considerably cheaper than conventional testing methods as the cloud can effectively incorporate testing hardware and software testing without having to create real-life labs.

 

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