Qualcomm Buys Atheros and Merger Best Practices

Rob Enderle

I'm at CES this week surrounded by things I want to buy with increasingly affordable prices. The only thing saving my retirement fund is that they aren't available on the market yet.

 

The technology companies continue to exist in a similar environment, and many of them are available at the right price and that price can be very attractive. While I worry about inflation, increasing the cost of the things I want to buy and, therefore, pushing me to buy early, puts pressure on firms to make acquisitions. The Qualcomm/Atheros acquisition is a case in point.

 

Let's revisit acquisitions for a moment for what you might expect to see if a company that you depend on is acquired, or if you are in a company that is being acquired or in the acquiring company itself.


Qualcomm + Atheros

 

First, I probably should chat about this Qualcomm/Atheros merger a bit. This situation is the combination of two similar companies with an increasing overlap in customers but little overlap in products. Both firms are in good shape and neither needs a significant turnaround effort. In short: This is the best kind of merger to do because there is limited risk and the benefits are relatively easy to showcase. Both vendors are in wireless networking, with Qualcomm mostly focused on small mobile devices like cell phones (they are the most common in devices that use Android and Windows Phone platforms), and Atheros is most common in notebook computers, and wireless access points and routers (Wi-Fi and Bluetooth).


 

Since the two markets they both serve are increasingly becoming blended, and the customers are increasingly the same across product segments for account control reasons, it makes sense for Qualcomm to expand and pick up Atheros' base. Part of the reason, of course, is to keep one of its competitors from doing something similar first and then using Atheros as a lever to drive it out. So while this is mostly offensive in terms of strategy, it has strong defensive elements as well.

 

What to Expect-What to Do

 

Common services will be blended and that means redundancies in areas like finance, accounting and operations. Other common services will likely be cut across both companies to contain costs and to increase the bottom line benefits. Salesforce changes will likely shift some sales people into market expansion roles and eliminate underperformers from both firms.

 

From your perspective, if you ever are the client in a merger such as this and have a preference for which team you want to remain, the time to start making noise is now. Being vocal about your choice to executive management will more likely give you the result you want.

 

If you are a customer-facing employee, now is the time to round up the clients you want to keep and make them vocal.

 

If you are internal, recognize that the acquiring company will more strongly protect its own employees than those of the acquired firm and if there are openings, target them immediately, especially if your role is redundant. Being on a consolidation team has some advantages and risks-advantages in that you can see the opportunities, risks in that you may not be able to move on them until your consolidation role is over.

 

Wrapping Up: Assessing Acquisitions

 

While this Qualcomm/Atheros acquisition makes a lot of sense, not all acquisitions do. In fact, in a consolidation market, sometimes the feeding frenzy gets ahead of common sense. When you start to see companies, making stupid acquisitions (I'm still not convinced the Oracle/Sun acquisition was smart ) in areas they have no knowledge and where there is little synergy (like Sony's purchase of content companies years ago), anticipate hard times. As either a client or an employee, you may want to abandon ship early to avoid painful years ahead. One thing is for sure: There will be a lot of acquisitions in 2011 and many will not be very smart. Cover your butt.



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