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Suprise #1

 
 
By Lawrence Walsh  |  Posted 2009-01-22
 
 
 

With the exception of a few earnings reports, IT vendors are reporting that sales are down and income projections are trending lower. The poor economy and leading indicators are forcing IT vendors to cut back on spending and cut jobs, but are these vendors really that poor?

According to FactSet Mergerstat, an analyst group that tracks mergers and acquisitions, and a new report by UpData Advisors, an investment services firm that specializes in technology mergers, the largest technology vendors are sitting on a mountain of cash that totals more than $107 billion.

Cash reserves are sometimes used to close revenue gaps, but most often for investments in new business initiatives and acquisitions. Don’t expect vendors’ cash reserves to save many jobs. Updata Advisors believes major vendors will use their wealth to acquire undervalued companies and add new technologies to their portfolios.

"While the economic uncertainty of 2008 is most certainly going to hang over into 2009, we believe that M&A will remain an important corporate strategy for growth and enhanced competitiveness. 2008 has proved that even in the most troubled economic environments, well-considered M&A transactions were still announced and completed," Update Advisors wrote in its recent report. 

According FactSet Mergerstat, the following are the top 8 vendors ranked by their estimated cash reserves.

8. EMC 
Cash Reserves:   $5.866 billion
2007 Revenue:    $13.230 billion
Number of 2008 M&As: 5
Value of M&As:  $226 million

7. Dell
Cash Reserves:   $8.572 billion
2007 Revenue:    $61.133 billion
Number of 2008 M&As: 1
Value of M&As:  $155 million

6. IBM   
Cash Reverses:    $9.756 billion
2007 Revenue:    $98.786 billion
Number of 2008 M&As: 12
Value of M&As:  $291 million

5. Hewlett-Packard   
Cash Reserves:   $10.246 billion
2007 Revenue:    $104.286 billion
Number of 2008 M&As: 5
Value of M&As:  $13.470 billion

4. Oracle
Cash Reserves:   $10.646 billion
2007 Revenue:    $17.996 billion
Number of 2008 M&As: 10
Value of M&As:  $7.202 billion

3. Google
Cash Reserves:   $14.412 billion
2007 Revenue:    $16.594 billion
Number of 2008 M&As: 2
Value of M&As:  Undisclosed

2. Microsoft  
Cash Reserves:   $20.722 billion
2007 Revenue:    $51.122 billion
Number of 2008 M&As: 20
Value of M&As:  $1.484 billion

1. Cisco Systems  
Cash Reserves:   $26.763 billion
2007 Revenue:    $34.922 billion
Number of 2008 M&As: 6
Value of M&As:  $335 million