These days, cash is king. Especially in the tech world.
According to Kelly Porter from Woodside Capital Partners, companies are sitting on more cash now than any time since 1958. (As a percentage of assets.)
The hoarding is particularly acute in the technology industry. This is odd because the tech world is so competitive, it seems that companies would get more benefit from investing in R&D or acquiring smaller companies to fill product gaps.
Porter, who led a panel on mergers and acquisitions at the Global Technology Symposium last Friday, expects some of this cash to go toward a new wave of M&A activity in 2011 and 2012. But he also noted that some big acquirers like Microsoft and Oracle have slowed down their pace significantly, even as others like Google are still spending freely.
So who has the most? You might be surprised at the winner.
(Note: we’re counting cash and short-term investments, which some companies lump together in their earnings statements.)
IBM has been on an acquisition spree for the last several years, and spent $6 billion just last year. The company has been very clear about its acquisition strategy and has promised that acquired companies will contribute $0.90 of its EPS by 2015.
But as Bloomberg noted recently, IBM's pace has slowed in recent months -- the company hasn't made an acquisition since October. In other words, look for a lot of activity from Big Blue soon.
After making a number of huge acquisitions in the last decade, culminating with its purchase of Sun in 2009, Oracle has slowed down in the last couple of years. Oracle has a pretty complete vertical set of solutions now -- from hardware through databases all the way up to business apps -- but could still fill in gaps with other big software, storage, or hardware companies.
Likely areas of acquisition include technologies important in cloud computing, like storage and security.
That's 1.2 trillion Yen.
Nintendo is strong in handheld gaming, but could improve its next-generation console business by buying cutting-edge technology like Microsoft did for Kinect. Game development studios are a possibility as well.
Intel made a couple of big acquisitions in 2010: security specialist McAfee for $7.7 billion and Infineon's wireless business for $1.4 billion, but the company still has plenty of cash on hand. Intel needs help competing in the mobile space and may look for more help there. That said, CEO Paul Otellini has said that Intel doesn't really have an acquisition strategy per se, but simply looks for opportunities as they arise.
Apple also has an unusually huge store of $32.7 billion in long-term marketable securities, which brings its total cash and securities position to nearly $60 billion.
In this case, the hoarding may be justified. Apple's products are selling so well that the company doesn't really need to do any acquisitions -- all it has to do is keep coming up with hits like the iPhone and iPad, although it might use acquisitions to boost its advertising business. And its stock price keeps going up without the help of buybacks or a dividend.
Google acquired 40 companies in 2010, and on Friday a representative from the company's M&A organisation told the GTS panel that it's likely to continue that pace through 2011. Acquisitions will probably be concentrated in the company's four main areas of focus, as outlined on its last earnings call: mobile, enterprise, display advertising, and video.
Cisco reports cash and investments together, and doesn't differentiate between long-term and short-term. The company did a lot of acquisitions in the early part of the 2000s, but has slowed down in the last couple of years -- the last big one was its purchase of set-top box maker Scientific Atlanta for nearly $7 billion in 2006.
Still, the company could expand in many directions, buying storage companies to boost its enterprise business, or making another big play for consumers, like it did with its acquisition of home network gear maker Linksys -- last fall, rumours emerged that Cisco was considering buying Skype
Microsoft dramatically slowed its pace of acquisitions in 2009 and 2010, and the company has said it prefers to enter broad partnerships like the Windows Phone - Nokia partnership it signed earlier this year, and the Bing - Yahoo partnership from 2009.