‘Tis The Season for Acquisitions

Ben Bajarin - Dec 1, 2010, 11:41 am CST
‘Tis The Season for Acquisitions

The holiday shopping season isn’t just for consumers. This is also the time of year where companies make acquisitions or start looking strategically for acquisition targets for their 2011 strategic plan. Google’s $5.3 billion bid for Groupon demonstrates what is happening.

I will be writing my 2011 predictions article soon where I will make some bold acquisition predictions. I am anticipating 2011 to be one of the most competitive years the consumer technology industry has ever seen.

When I survey the market landscape for next year below the surface I see a lot of chaos. The market may look orderly to the on looker but underneath it all there is a lot of chaos and turmoil. The primary reason is because it is getting increasingly harder to make money with hardware. Those companies who have hardware only businesses will inevitably shrink over the next few years.

The value chain always moves from hardware to software and then to services. This is what we are witnessing right now. This is why HP is buying software and services companies. This is why Google is buying a services company. This is why other large companies like Apple and Microsoft will continue to buy or invest in companies that emphasize software or services.

Proprietary software and services are what make a product a solution. Solutions are what companies need to differentiate and drive customer loyalty. The more invested a consumer is in a companies software ecosystem or service the less likely they are to leave.

This is where the battle will be in 2011 and for the foreseeable future. Apple is most likely the last company in this sector who can truly make money on hardware. All of them however will battle fiercely to own the customer either through the software ecosystem or the services or both. This is why acquisitions will happen quickly. I will be watching as any and all companies that have generated mass consumer appeal with a service free or paid to become acquisition targets.

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