Recession: Will Your Vendors Be Acquired?

Smart companies will hunt for good merger and acquisition opportunities, with stocks at multiyear lows. Here are the M&As to watch.

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Predators

Microsoft Corp.

Symbol: MSFT

Market cap: $204B

Cash and short-term investments: $23.7B

Microsoft is nicknamed "the Borg" for more than just its might in the market. The company also likes to buy and assimilate firms, both start-ups to get their technology and big businesses to acquire market share. The latter was the reason why Microsoft almost spent $48 billion to get Yahoo. Having shown its willingness to spend that much money, anything in the low billion-dollar range must seem like a bargain.

Oracle Corp.

Symbol: ORCL

Market cap: $84B

Cash and short-term investments: $13B

In the past three and a half years, Oracle has spent at least $32 billion on acquisitions, turning itself into the vendor of a top-to-bottom enterprise software stack that is arguably broader in scope than any rival suite.

Yet Ellison hinted strongly on Friday that he wasn't done. "Acquisitions that we have been looking at for some time may now be more attractive," he told shareholders. But he said Oracle was now more interested in smaller, fast-growing start-ups rather than large public companies.

IBM

Symbol: IBM

Market cap: $121B

Cash and short-term investments: $9.8B

IBM, which this week reported a 20 percent jump in Q3 net income, is a quiet but happy shopper. The company has already bought 12 firms this year, including business intelligence vendor Cognos Inc., for $5 billion. With nearly $10 billion in cash, expect IBM to continue its shopping spree.

Google Inc.

Symbol: GOOG

Market cap: $103B

Cash and short-term investments: $12.7B

Google's $3.1 billion cash purchase of online advertising firm DoubleClick Inc. last year was an aberration. The online company has otherwise mostly bought start-ups to build out its portfolio. Like with its $1.65 billion stock purchase of YouTube Inc. in 2006, Google likes to use its shares whenever possible. But he collapse of its stock price -- down 56 percent from its peak a year ago -- would seem to rule out stock-based transactions, for now.

Hewlett-Packard Co.

Symbol: HPQ

Market cap: $94.3B

Cash and short-term investments: $14.8B

HP has shown its willingness to make big buys for giant leaps in the marketplace. In May, HP bought IT outsourcer Electronic Data Systems Corp. for $13.9 billion, and we shouldn't forget its $25 billion merger with Compaq Computer Corp. in 2002. With EDS, HP looks to cement its lead over IBM as the world's largest IT vendor by sales, a lead it established just two years ago. Look to HP to go bargain hunting and add to the six firms it has bought so far this year.

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