Tech: The Return of Risk-Taking

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CHECKBOOK AT THE READY

Chairman and CEO Michael S. Dell said the price was justified and Perot will help fuel Dell's growth and strengthen its competitive position. In the meantime, Dell is considering additional deals and keeping its checkbook handy. "There's more we can do in service, there's more we can do in hardware, and there's more we can do in software," said Brian Gladden, Dell's chief financial officer.

Bankers and analysts point to other tech segments that look ripe for mergers and acquisitions. Especially hot, says Scott Kessler, an equity analyst at Standard & Poor's, are semiconductor equipment makers and software companies that deliver products over the Web, including Taleo and SuccessFactors. He adds that small to midsize software companies such as Tibco Software (TIBX) and Sybase (SY) could also be targets. Amity Millhiser, partner and practice leader of PricewaterhouseCoopers' Silicon Valley transaction services group, says would-be buyers are on the hunt. "Tech companies are really jumping in [to look for deals]," says Millhiser. "There's a lot of pent-up demand."

Sebastian Thomas, head of U.S. technology research for RCM Capital Management, which manages $13 billion in assets, says developments such as cloud computing will likely push giants such as Cisco (CSCO) or EMC (EMC) to shop for storage, networking, and systems management technology. Brocade Communications Systems (BRCD), 3PAR (PAR), BMC Software (BMC), Riverbed Technology (RVBD), and Blue Coat Systems (BCSI) could all attract suitors, says Thomas.

Newfound optimism is beginning to spill over into other segments of the economy. There have been nine consecutive weeks in which companies have filed the paperwork for IPOs, the longest streak in a year. Among the companies with upcoming offerings are hotel enterprises, retailers, makers of consumer goods, and a pork processor looking to raise $2 billion. Overall, mergers and acquisitions are down about 40% from a year ago, but a few pockets of growth are emerging. This month, deal volume is up from a year earlier in the consumer staples, real estate, telecom, health-care, and media and entertainment industries. Says Zandi: "Slowly but surely confidence will build across the economy."

With Aaron Ricadela and Cliff Edwards

Ante is an associate editor for BusinessWeek.

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