Arnon Dror | Tech Companies Acquire Cloud Businesses
Not one, not two, not even five legacy tech companies have made a major acquisition this year. As of this writing, the number of legacy tech companies that are strengthening their cloud businesses has gone up to seven. Arnon Dror says that SAP is the latest company to join the fray, having acquired research and experience software company Qualtrics for $8 billion in cash. The news comes shortly before Qualtrics is set to go public. Image Source: The Business Journals
Legacy Tech Companies Acquisitions
As mentioned, SAP is the latest company to bolster its cloud business. Earlier in March, Salesforce acquired customer relationship management giant Mulesoft for a cash and stock deal worth $6.5 billion. Arnon Dror notes that many analysts already have a “Buy” rating for Salesforce even before it acquired Mulesoft. He believes this is a step in the right direction for the software company as the tandem will enable businesses to combine data from different sources such as private and public clouds and data centers.
Later in June, Microsoft bought software development platform GitHub in a $7.5 billion stock deal. Once dominating the market with Windows, Microsoft has been struggling to get back on top in the past few years. With the GitHub acquisition, however, Arnon Dror thinks that Microsoft is at an advantage to build and develop the next biggest software because of GitHub’s massive repository of code.
A month later in July, Broadcom acquired enterprise software company CA Technologies in an $18.9 billion deal. The chip maker however seems to be off to a rough start, having lain off some 2,000 CA Technologies staff. Arnon Dror says that layoffs are not uncommon in such deals.
In August, Cisco acquired cyber security company Duo Security for $2.35 billion. Speaking of cyber security and cybercrime, Arnon Dror recalls the Equifax fiasco last year which affected nearly 148 million consumers, one of many disastrous cybercrimes to hit the country. As an enterprise security company, the finance executive said that Cisco can create more secure IT infrastructures with the help of Duo Security who is known for its secure two-factor authentication service.
Meanwhile, in September Adobe acquired marketing software company Marketo in a $4.75 billion deal to expand its cloud marketing business, and last month, IBM acquired software company Red Hat for $34 billion in cash to get a head start on businesses that have yet to migrate to the cloud.
Some of these deals may not make sense at first but mergers and acquisitions or M&A’s are common growth strategies, explains Arnon Dror, like in the case of Facebook acquiring WhatsApp for a cool $19 billion. Initially, the deal was met with criticism for being overvalued but nearly five years later, the social networking company finally seems to be ready and serious on monetizing its investment, by displaying ads on the app. The year isn’t over yet however. If Arnon Dror is right about what he sees and the patterns emerging, the market may see even more major deals in the coming weeks.