Tech mergers ahead?

Posted by Wolfgang Gruener

Opinion – The current financial crisis may offer a short term opportunity for some very interesting hostile takeovers. If there was ever truth to the rumor that Apple was interesting buying Sun, Apple could scoop the company up for pocket change. Intel could get rid of AMD for even less and even AMD could use its recent cash infusion to take a shot at Nvidia. But the hottest ticket may actually be RIM – It is not quite in reach for Apple, but Microsoft may be looking at a huge bargain. Are we looking at a period of big mergers?

Reuters today ran a story that suggested that Microsoft might be looking to buy Blackberry maker Research in Motion (RIM), which not only would be an enticing match for Microsoft’s existing product line and, but also stir up the battle with Apple and Google. Best of all, Microsoft could buy the company in cash. RIM shares are down more than 60% from is 12-month high, giving the smartphone maker a market cap of about $33.4 billion. And as the market goes south, analysts believe that a Microsoft bid is certain:

"RIM is a massive strategic fit" for Microsoft, said Canaccord Adams analyst Peter Misek. "I'm fairly certain they have a standing offer to buy them at $50 (a share)."   

But RIM isn’t the only stock that is down. In fact the best performing stocks, in relation to their 12-month highs, are HP, Oracle and IBM, which are down about 28%, 31% and 32%, respectively. On the other end of the spectrum, we see companies such as Nortel, which is down 91%, Nvidia (down 83%) and Sun Microsystems (down 79%).   

Here is a sampling of tech stocks, their performance and the market cap of each company as of Thursday, 8 PM EDT:

Company

Stock value decline as of 10/9/2008 compared to 12 month high

Market capitalization in billions ($)

     

Nortel

-91%

1.5

Nvidia

-83%

3.9

Sun Microsystems

-79%

3.9

Motorola

-76%

10.3

Palm

-76%

0.5

AMD

-72%

2.5

Seagate

-67%

4.6

Sandisk

-67%

3.8

Ebay

-65%

20.8

Yahoo

-63%

17.5

RIM

-60%

33.4

Apple

-56%

78.6

Dell

-56%

26.3

Google

-56%

103.4

Cisco

-50%

101.4

Novell

-45%

1.5

Intel

-44%

87.7

Adobe

-42%

14.9

Microsoft

-41%

203.6

Symantec

-39%

11.7

IBM

-32%

120.6

Oracle

-31%

88.6

HP

-28%

94.3

 

Is it just me or are there a few very obvious bargains and matches in there? It appears that those companies with a strong cash base may be in a very unique position to acquire a rival or expand their product portfolio (note: market caps do not equal likely purchase prices). You may even have a few eccentric billionaires out there who would be able to scoop up a bargain: For example, a piece of American industry history, albeit not the most profitable, is currently valued at about $2.7 billion – General Motors.