Going Out With A BangGoing Out With A Bang

Business-technology veterans have grown so used to nonstop consolidation that even the occasional megamerger barely slows them down. But even they couldn't help but notice the big bang of deals to end this year and the implications they have for 2005.

"To think that the PeopleSoft-Oracle merger is only the third-largest tech merger of the week, to me is utterly astonishing," says Steve Canter, CIO of Berlin Packaging. The $10.3 billion that Oracle is paying trails Sprint's $35 billion for Nextel and Symantec's $13.5 billion for Veritas. And the march of smaller acquisitions by software heavyweights rolled on last week, such as Siebel Systems' purchase of eDocs and Microsoft's purchase of an anti-spyware company. And was it only two weeks ago that IBM's decision to leave the PC business, selling to Chinese manufacturer Lenovo Group, seemed liked the deal of the year?

Yet the pipeline of future innovators/acquisition targets looks fairly healthy. Though the $4.6 billion in venture funding for startups in the third quarter is down 4% from the same quarter last year, the median amount invested in early-stage IT companies is at its highest level in two years, $5.7 million, according to Ernst & Young and VentureOne. And valuations for software--and all other IT startups--are higher than a year ago.

Still, we shouldn't expect the pace of consolidation to ease in 2005. Says Jason Maynard, software analyst at Merrill Lynch, "There are still too many vendors."