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Wall Street Beat: Mobile, cloud trends spark tech mergers and acquisitions

Marc Ferranti | May 26, 2014
Despite economic turbulence, tech leaders are confident that users will adopt cloud and mobile technology.

Confidence in software-as-a-service, mobile and cloud technology is spurring tech mergers and acquisitions, despite lingering economic worries, according to market watchers.

The total value of all tech M&A deals whose values were disclosed in the first quarter worldwide was US$66.6 billion, up 83 percent year over year and the highest level in 14 years, according to the Global Technology M&A Update from EY (formerly Ernst & Young). The number of deals rose 15 percent year over year to 758 transactions globally, EA said in the report, issued this week.

On its part, PricewaterhouseCoopers noted that in the U.S., 57 deals closed in the first quarter, up 36 percent year over year, for a total value of $22.6 billion, up by 113 percent. Mobile and cloud-related deals dominated the top transactions for the quarter, PwC noted in its US Technology Deals Insights, Q1 2014 update, also published this week.

Top deals for the first quarter included: Google's $3.2 billion acquisition of Nest Labs, the maker of Internet-connected home devices; NCR's $1.7 billion purchase of Digital Insight, the online and mobile banking service provider; Oracle's $1.5 billion acquisition of marketing software provider Responsys; and VMware's deal to buy mobile device management company AirWatch for $1.5 billion.

"Software and internet deals will continue to increase," PwC predicted.

Tech vendors are trying to position themselves to take advantage of the move to mobile and cloud technology by consumers and businesses.

"I am encouraged by the near record deal volumes in the first quarter of 2014, and that transformational big-ticket deals continued," said Joe Steger, EY's head of Global Technology Industry Transaction Advisory Services, in the company's report. "Both are being driven by the still-increasing acceleration of change based on the five transformative technology megatrends of mobile, social, cloud, big data analytics and accelerated technology adaptation — and the new possibilities they foster, such as IoT [Internet of Things]."

There have been some economic clouds on the horizon, however.

While unemployment held below 7 percent in the U.S. in the first quarter, concerns still remain about the participation rate and exclusion of part-time workers, PwC pointed out.

In addition, there were some disappointments in first-quarter earnings. "Mixed results amongst recent earnings for leading technology companies put pressure on business model efficiency and competitive positioning," PwC said, adding, "Abroad, China fared better than most expected with a reported GDP growth of 7.4% for the first quarter, but the country's manufacturing sector has recently been reported to be shrinking."

Meanwhile, slow emergence from recession coupled with the crisis in Ukraine continue to raise concerns for European markets.

Just last week, IDC reported that a slowdown in the growth rate for mobile device sales and economic uncertainty in emerging markets would curb global IT spending this year. IT spending will rise 4.1 percent in constant currency this year, to US$3.7 trillion, IDC said. That's lower than last year's 4.5 percent growth and down from IDC's prior forecast of 4.6 percent growth.

 

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