Menu
With market meltdown, which tech firms become predator or prey?

With market meltdown, which tech firms become predator or prey?

Smart companies will hunt for good merger and acquisition opportunities with stocks at multi-year lows. Here are the ones to watch.

While most eyes are still on stopping the bleed on Wall Street, smart tech companies will likely take a page out of Warren Buffet's playbook by looking for merger and acquisition opportunities with stocks at multi-year lows.

The Nasdaq Composite Index, where most tech stocks trade, dropped 13 percent last week. Nasdaq is down 26 percent in the last 30 days -- and off 43 percent from a year ago.

That makes the downturn worse than Nasdaq's 36 percent fall during the crash of 1987, but not as bad as the 78 percent decline during the dot-com crash of 2000, Barron's blogger Eric Savitz notes .

Individual tech stocks, some of which trade on Nasdaq and others on the New York Stock Exchange, took a beating. Sun Microsystems, Yahoo, and Nvidia last week fell 27 percent, 20 percent and 18 percent, respectively.

Despite the credit crunch, that could open up buying opportunities for cash-rich companies, said Oracle CEO Larry Ellison at his company's annual stockholders' meeting, reported The Wall Street Journal.

It also makes struggling firms that have hoarded cash more attractive, no-risk targets. For instance, Sun's market cap is just US$3.61 billion, despite holding cash and short-term investments worth US$2.7 billion.

Here's a run-down of the potential prey and predators in this new buyer's market.

Note: all stock prices and market cap figures are as of close of trading Friday, October 10. Financial figures come from Yahoo Finance, Morningstar.com and SeekingAlpha.com.

Prey

Sun Microsystems | Symbol: JAVA | Stock Price US$4.80 | Off 52-week high: 81 percent | P/E ratio: 9.8 | Market capitalization: US$3.61B | Cash and short-term investments: US$2.7B | Cash/market cap: 75 percent (higher better for acquirer)

Though Sun has been profitable for the last four quarters, it remains a shadow of its glorious self during the dot-com era. Despite paying US$1 billion to buy open-source database vendor MySQL AB Sun still has US$2.7 billion in cash, making it, from that standpoint alone, a no-brainer for the right buyer.

On the other hand, CEO Jonathan Schwartz has indicated his desire to turn the company around rather than sell. And with its cash-in-hand, it too could be a buyer. As colleague Steven J. Vaughan-Nichols notes, Sun has a checkered history, such as with its failed US$2 billion buy of Cobalt Networks.


Follow Us

Join the newsletter!

Error: Please check your email address.

Tags bailoutwall street

Show Comments