A decade on from the Internet bust, should young investment bankers once again be fighting to get on the technology beat?
With the sector's top eight companies sitting on $125 billion of net cash, deals look set to continue.
And investors won't necessarily be burned.
Intel's shares may have dropped after the company agreed to pay a huge price for McAfee, but, in general, markets have been surprisingly supportive of acquisitive firms as growth has slowed.
.Oracle has spent $28 billion on seven companies since 2005, according to Dealogic data on deals over $500 million whose terms were disclosed. Its stock is up 67% over that period. Hewlett-Packard has bought six companies for $25 billion and seen its stock rise 82% since 2005. The Nasdaq Composite index is down 1.3% in that time.
Microsoft, in contrast, has spent $9 billion on five companies, a far smaller sum relative to its much larger market capitalization. Its shares are off 10% since 2005.
There are other ways to get cash off the balance sheet. In their most recent quarters, the top eight bought back $13 billion of stock. Some even pay decent dividends.
Still, with the sector generating tens of billions of dollars from operations each year, bank accounts should keep expanding despite buybacks and dividends. So more big deals are likely in the offing.
The surest path to riches, of course, isn't acquisitions but innovation. The two least acquisitive, Google and Apple, have seen share gains of 150% and 680%, respectively, since 2005. In their cases, starting dividends or share buybacks make sense. Each has about 20% of its market capitalization in cash, yielding next to nothing. Saving, in their case, is no longer a virtue.
http://online.wsj.com/article/SB10001424052748703447004575449772842325594.html?mod=ITP_moneyandinvesting_13
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