An IT Feeding Frenzy?

Arthur Cole

There's chum in the financial waters and the sharks are circling. Could it be that the tech industry is on the verge of a feeding frenzy that would make the past year or so look tame by comparison?


It seems to be both a symptom of the tremendous changes hitting the IT industry and the result of weak overall economic performance resulting in too many dollars chasing too few opportunities.


As evidence, we need only witness that fury of activity resulting from the speculation, mere speculation mind you, that Oracle was on the verge of buying EMC. The frenzy apparently kicked into high gear Thursday after a single Wall Street analyst cited unnamed rumors that such a deal was imminent. The rush drove EMC stock up 5 percent by mid-day and pushed Oracle down 1 percent in heavy trading.


Now, to be sure, there are plenty of reasons why Oracle and EMC would be a good fit. (IT Business Edge's Rob Enderle disagrees and doesn't think it will happen.) Oracle has made no secret of the fact that it wants to be a one-stop-shop for the enterprise, which is why it snapped up Sun Microsystems earlier this year. Sun was primarily known for its high-end server line, but it also had a healthy storage business led by the StorageTek line. An EMC buy would allow Oracle to supplement its storage business and remove a major competitor at the same time.


Let's also not overlook the lure of data warehousing. EMC recently jumped into that market in a big way with the purchase of Greenplum, a data computing appliance that competes head-to-head with Oracle's Exadata and IBM's Netezza platforms. That, along with EMC's control of VMware, gives it a significant advantage in cloud-based data management-something that Oracle, or anyone else for that matter-would find very appealing.


All of this is just the tip of the iceburg. As Bloomberg's Peter Barrows, Joseph Galante and Serena Saitto point out, the scope of possible mergers/acquisitions in the IT field is enough to make your head swim. With Oracle, IBM, Cisco and Dell leading the drive to own the next-generation data center, and in command of some $100 billion in cash, just about every small and mid-tier vendor and service provider is on the table. Names to watch out for include Isilon Systems, RiverBed and Fortinet, all of which have seen steadily increasing share prices in recent months.


Of course, speculation is what makes the financial world go round. And if past is prologue, eventually there will be one or more big winners who manage to cobble together the winning formula that produces market leadership. The caveat, though, is that there will likely be multiple losers who get steamrollered as time and technology marches on.


It's not pretty, but it's life in the open ocean.



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