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Are We Prime For a Historic Tech M&A Surge?

Thursday, 1 Oct 2009 | 1:10 PM ET

Cisco's play for Tandberg is a real sign of the times for cash rich tech companies. Here's a company trading at or near its 52-week high, and yet dips into its swollen coffers and pays for the $3 billion deal all in cash. And why not, with $35 billion in cash on the balance sheet, Cisco can certainly afford it.

The deal is potentially a blockbuster for Cisco, especially as it continues to open new competitive fronts against its rival Hewlett-Packard. Telepresence has been an enormous success for Cisco, and continues to grab market share from HP's rival system called Halo. Cisco says it has sold something like 1,000 of these systems over the past two years, and at a cost of several hundred thousand dollars a piece in some cases, there's no question that Telepresence can be a significant moneymaker. In fact, I was at Dreamworks in Glendale, Calif. a few weeks ago and that facility alone has three of them.

Cisco claims its Telepresence (a technology that I have talked a lot about on this blog) has saved the corporations that install it hundreds of millions of dollars in travel expenses alone, not to mention the savings in time, and the improvements in efficiency. There's little question that Tandberg and its long list of customers (HP even resells some Tandberg equipment. Wonder what happens to that arrangement?) will improve Cisco's Telepresence footprint in Europe, as well as elsewhere around the world.

And the Tandberg deal fits right into Cisco's broader vision of a robust, global computer network sending and receiving as much data as possible. The network is Cisco's core, and deals like Tandberg, and Webex and Scientific-Atlanta and even Pure Digital earlier this year, fit into the broader scope of a world living on video, and relying on Cisco routers and switches to get it all from one computer to another.

Cisco could have easily paid for the deal with stock, but it chose cash, and why not. With $35 billion on hand, even after 134 acquisitions since 1993, not having to dilute shareholders for a deal like this is a pretty nice trick. If you've got it, flaunt it. And that could be the catch-phrase for a lot of big cap tech nowadays. Just last week, 24/7 reported that the top 20 names in tech are sitting on a whopping $335 billion cash. And Google, with $19 billion in cash in the bank, confirmed last week that it hopes to do a deal a month for the next 12 months.

Where is that cash? Cisco rival HP has $25 billion; Microsoft, $36 billion; IBM, $12.5 billion; Intel, $19 billion; even Qualcomm has $15 billion.

We've already seen some pretty intriguing M&A in tech: Dell and Perot; Oracle and Sun; Intel and Wind River Systems. And there's been lots of rumors about who might be next. Electronic Arts? I was hearing lots of rumors that Disney would make a play for EA, something that CEO John Riccitiello wouldn't outright deny when I asked him about it, and he even highlighted some of the synergies, but that was, of course, before Disney's massive deal for Marvel Entertainment a couple of weeks ago. Salesforce.com always seems to come up as a potential target, and I have long said that an app-hungry company like Google could make a deal like that work out. And Google could easily afford it.

I think the Cisco deal is hardly the last major deal. It's merely the latest, and investors should strap in: I think we're on the lip of an M&A frenzy the likes of which the tech world has probably never seen before.

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Questions? Comments? TechCheck@cnbc.com

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