Wheeling and Dealing

What does the Tech M&A boom say about the future?

Facebook and Instagram; Dell and Wyse; Microsoft and the AOL patents—what do these things have in common? They were all announced in the past two weeks and they all cost a billion dollars. The technology industry has lots of cash to deploy. But they also show us where tech is going.

Sometimes the deals make sense: Facebook’s mobile app is lousy; the Instagram app has been growing, although lately it has lost a little of its edge to Pinterest. Still, for Facebook to snare a top photo-sharing competitor shows that Facebook is trying to improve its mobile presence.

It’s much harder to see the logic behind the Dell/Wyse deal. Dell is synonymous with PCs; the company grew gangbusters with the PC market in the ‘90s. But with the rise of mobile computing and tablets, those days seem to be over. As technology kept changing Dell kept cutting prices. With the Wyse acquisition Dell is buying another low-tech low-margin hardware maker, trying to extend itself into another ancillary market.

Finally, Microsoft’s purchase of AOL’s Netscape patents shows us who won the browser wars of 15 years ago. Microsoft is trying to move into mobile computing, and it needs the patents to get there. Apple has been quite aggressive in pursuing patent-infringement lawsuits to protect its turf. With a portfolio of the old Netscape patents, Microsoft may have some ammunition to fight back.

What’s the trend? It’s all about mobile computing. Billions are being spent either pursuing or fighting the dream of the pocket-sized computer. These billion-dollar deals just put a exclamation point on that sentence.

Douglas R. Tengdin, CFA
Chief Investment Officer
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