Cisco's data center assault spurs M&A talk

Last week's data center splash by Cisco is leading to speculation that there will be some high profile marriages among companies looking to feather a more stable nest in the data center. You've already read about IBM and Sun, and perhaps HP and Brocade.

Now investment firm UBS today released its list of possible engagements and the rationale behind them. Increasing competition between Cisco, IBM and HP in the data center will force these companies to pick some mates -- not just partners, UBS asserts.

With press reports suggesting IBM may acquire Sun, and Cisco recently raising $4B in debt, we believe these Tech Titans will consider M&A in addition to partnerships. We believe likely candidates in this battle for the data center include BMC, Juniper, Brocade and Netapp. Larger candidates like Accenture and EMC/VMWare may be more likely in the longer term.

HP may be less acquisitive than Cisco or IBM due to its digestion of services giant EDS, UBS notes. Cisco may be the more aggressive of the three suitors:

We see HP's integration of EDS as being a priority that would diminish appetite for additional targets. In addition, if IBM acquires SUN it would likely limit additional large deals. Cisco is likely to be the most acquisitive in our view given its large net cash position and stated goals of using M&A for consumer, video and data center.

UBS sees convergence -- conception? -- of network and storage two years away, however, due to the recession, inertia among players, and a "lack of confidence on unified standards."

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