Market Downturn Could Spur Acquisitions for Tech Giants

The recent market downturn is making it easier for tech giants to acquire small, innovative startups.
According to an article on the Wall Street Journal:

Enterprise-technology giants like International Business Machines Corp., Cisco Systems Inc., Hewlett Packard Enterprise Co. have all seen their market value shrink by at least 9% in the past month—underperforming the S&P 500 index, which fell 7% over the same period.
Some younger firms have fared much worse. Box Inc., a seller of Internet-based data storage, has dropped by 26%. Workday Inc., which sells online access to accounting and human resources software, lost 13%. The market capitalization of Hortonworks, which makes data-analytics software, has plummeted by half.
Enterprise-technology companies provide the infrastructure that powers the global digital economy. They make the computing hardware that stores and processes business information. And they supply the software that can unite tens of thousands of Internet-based servers into a corporate supercomputer, crunching terabytes of data to find hidden patterns and insights.
The business-technology industry’s biggest players have been struggling to adjust to broader changes like the shift from on-premises data centers to cloud computing delivered over the Internet.
Buying smaller, cash-poor public companies—which the recent selloff has made much cheaper—could help them deliver new-breed products and services. Shares of privately held ventures are being discounted too, creating manifold opportunity for cash-rich incumbents.
With nearly $60 billion on hand, Cisco is in an especially strong position to make acquisitions. IBM and HP Enterprise have $7.7 billion and $10.1 billion in cash respectively, but they are also already carrying much higher debt loads, which reduces their flexibility.

Click here to read the full article on the Wall Street Journal.