Cloud, Storage Deals Likely in ’15
Look for technology merger and acquisition activity that surged last year to continue in 2015 as potential suitors in sectors like software, cloud computing and storage seek to acquire new services and consolidation quickens in crowded markets.
According to a forecast released by market watcher 451 Research, deal-making momentum that hit record levels in 2014 is expected to grow this year.
In areas such as cloud infrastructure, the 451 report noted that service providers are attempting to stave of commoditization by layering new services on top of their compute offerings. "Although partnerships can expand the portfolio, the benefits of exclusive ownership and the ability to customize [intellectual property] should lead to acquisitions in high-value segments such as information security, software development and performance monitoring," the M&A report concluded.
In the cloud sector, companies like IBM have forged cloud partnerships with the likes of Apple. The two are partnering on a cloud platform called Bluemix designed to help developers build and run Web and mobile applications. Still, IBM is feeling pressure to abandon its current share repurchase strategy and use its cash for cloud-related acquisitions. Among the places to look, observers argue, are data analytics and Internet security firms. Another possible target for IBM could be a cloud-storage specialist like Box Inc., analysts said.
IBM's 2013 takeover of SoftLayer Technologies Inc. was a hit with industry watchers who are now waiting for slumping IBM to make its next acquisition move.
The storage sector also appears to be ripe for deals in 2015, according to 451 Research, as vendors jockey for position as flash and other solid-state technologies dominate storage for mission-critical workloads. "That has sparked a wave of acquisitions by not only storage systems vendors, but also former component manufacturers," 451 said. "The remaining startups are rapidly hitting make-or-break points, with a few likely to be sold for scrap while at least one or two others fetch multibillion-dollar valuations in an IPO."
Some storage acquisitions have progressed to spin outs. For example, SanDisk Corp. announced earlier this month the spin out of its ioControl hybrid storage unit that reemerged as NexGen Storage. Under the arrangement, SanDisk will supply NextGen with PCIe flash and disk drives as the new storage company focuses on hybrid flash arrays.
Elsewhere in the storage sector, persistent rumors last fall that market leader EMC Corp. was in play have so far failed to result in a deal. Among the most oft-mentioned suitors are Hewlett-Packard, which made several cloud acquisition last year, and Dell. Last fall, HP acquired Eucalyptus Systems, the developer of open source software used to build private and hybrid clouds.
The market researcher also projected that the data management sector is ripe for deals in 2015 as more workloads move to the cloud. "Look for integration [platform-as-a-service vendors] to evolve beyond [software-as-a-service] to on-premises integration, likely taking share from legacy vendors," 451 Research forecast.
Other macroeconomic indicators pointing to another big year for tech merger and acquisitions include "bullish sentiment from corporate acquirers and bankers" and a "re-energized private equity market," 451 Research concluded.
