Handicapping IT Acquisitions

Opinion: IBM and HP are winners of recent activity in the technology industry.

As a kid, when I would go to the racetrack with my dad, the tout sheet vendors would always try to sell me their sheets in the parking lot as I walked in. If I was walking in for the start of the third race, they would have a tipsheet that showed they had picked the first two winners, hoping I would want to buy their guaranteed, no-fail tipsheet.

It took me a while to realize that those vendors had figured out the art of on-demand printing long before the concept had made its way into high tech. In recent weeks, there has been a flurry of acquisition activity in the IT industry. And, just like those racetrack tipsheet vendors, we already know the winners. But, unlike the track, the race is just beginning. Here are some of my odds on the current races.

/zimages/2/28571.gifClick here to read a Q&A with HP Executive Vice President Ann Livermore about her companys purchase of Mercury Interactive.

Hewlett-Packard buys Mercury Interactive for $4.5 billion. Though Hewlett-Packards last really big acquisition (Compaq) got the previous CEO (Carly Fiorina) in sufficient-enough trouble to lose her job, this acquisition has better odds. OK, there is a great irony in Mercurys history as a BPM (business process management) company being embroiled in a long-running stock option scandal investigation, but the companys products and services always seemed solid.

If HPs current CEO, Mark Hurd, can marry the HP heritage of managing computing resources such as servers and network systems with the Mercury heritage of measuring IT investments versus business plans, the multibillion-dollar bet would be a good deal. Id give it a 60-40 chance in favor of success. Id raise the ratio if Hurd promises to ban the words "optimize" and "maximize" from the combined companies marketing literature.

IBM buys MRO Software for $740 million. Was this IBMs East Coast (MRO is based in Bedford, Mass.) echo to HPs West Coast power play? Maybe, but if HP buying Mercury, of Mountain View, Calif., was pulling in a company that tries to bring measurement standards to the vagaries of optimizing and maximizing processes, IBMs purchase was about tracking and managing tangible things. Do you want to know where your truckload of new autos is? How about knowing how well the equipment at your power plant is operating? Use MRO.

Whereas HP will have to get over a big vagueness hump before convincing new customers of its software value, IBM will be able to point to real stuff in the warehouse and rail yard and say it will be able to send more bucks to the bottom line. Easier story, so better odds for IBM at 80-20 for success if it can make it all work with the rest of the IBM line.

Brocade Communications Systems buys McData for $713 million. This one will be tough to gain the winners wreath. Brocades previous management was also involved in a stock option scandal. The two companies have overlapping product lines and overlapping customers. Cisco would really, really like to be No. 1 in this SAN (storage area network) market, where Brocade is first and McData is second (although that ranking can change depending on who is counting).

Can the new Brocade continue to put its past scandals behind, rationalize its product lines, keep all its existing customers happy, gain new customers and do this while keeping Ciscos quickly closing horse away from the winners circle? Its a muddy track, and 50-50 odds would be a gentlemans gift wager.

LogMeIn buys Applied Networking. Our own Spencer F. Katt had the early line on this one. LogMeIn does remote computer monitoring. Applieds product is the Hamachi zero-configuration VPN. With Hamachi still in beta and unproven in larger corporate racecourses, this horse has no track record to go on. Getting the product from beta to shipping would be a win in this race.

Editorial Director Eric Lundquist can be reached at eric_lundquist@ziffdavis.com.

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