SAN FRANCISCO — Oracle Corp. and EBay Inc. went on a $10-billion shopping spree Monday -- the latest in a series of acquisitions that signal the buy-or-be-bought outlook of a maturing Silicon Valley.
Oracle, which has closed seven other deals since January, bought Siebel Systems Inc. for $5.85 billion to eliminate a big rival in corporate software and position itself to challenge market leader SAP. EBay agreed to pay as much as $4.1 billion for Skype Technologies, a small but fast-growing company that allows users to make Internet phone calls that the online auctioneer hopes will drive expansion overseas.
Although the rationales of the deals differ, behind both acquisitions is a feeling that the high-tech and Internet landscapes increasingly will be controlled by those big enough to compete globally. To do so, companies big and small feel compelled to constantly expand their offerings by branching into new businesses.
"There is a very strong sense that five years from today, this landscape will be very different," said Ken Marlin, managing partner of Marlin & Associates, an investment bank focused on media and technology deals. "Winners are being defined, and there is a closing window of opportunity for people to ensure that they are among those winners."
Ironically, many of the busiest buyers are companies that just a few years ago were tiny start-ups whose ideas challenged established tech titans such as Microsoft Corp. In addition to EBay, which started in a San Jose living room, big spenders include Yahoo Inc. and Google Inc., both of which were founded by Stanford University graduate students.
The deals also suggest to some analysts that big companies are optimistic about the economy even in the face of Hurricane Katrina and soaring energy prices. Overall, U.S. companies are on track to spend $1 trillion on mergers and acquisitions this year, the highest level since 1999, according to Merger Insight, an affiliate of New York brokerage firm Wall Street Access. About 8% of the total dollar value comes from technology -- more than double last year, said investment banking firm Barrington Associates.
"These transactions are really a bet on continued economic growth," said Merger Insight President Tom Burnett.
And the hope among investors is that they may also give languishing stock prices a boost. Although both EBay and Oracle generate billions in cash every year, the value of their shares has stagnated along with those of many other profitable tech companies widely considered to have slowed their growth after the boom of the 1990s.
Google branched out from its search engine by acquiring, among other businesses, the Picasa photo management service, the Keyhole digital mapping service and the Dodgeball.com social networking service, all for undisclosed prices. Yahoo snapped up the small software companies Konfabulator and WUF Networks. Microsoft bought Teleo Inc. for its voice over Internet protocol service and FrontBridge Technologies Inc., an e-mail security company. For its part, EBay paid $620 million for online shopping service Shopping.com and $415 million for Web classified site Rent.com.
Other companies on a buying spree include Sun Microsystems Inc., which purchased Storage Technology Corp., a maker of tape drives and backup software, this summer for $4.1 billion. Adobe Systems Inc. in August bought Macromedia Inc., a graphics and animation software company, for $3.4 billion. Security software maker Symantec Corp. in July bought Veritas Software Corp., a storage software company, in an all-stock transaction worth $10.3 billion.
"This is playing out all over," said David Hilal of Friedman, Billings, Ramsey & Co.
But there's no guarantee that simply getting bigger will work, as America Online's acquisition of Time Warner Inc. in 2000 demonstrated. The combined company is still struggling to capture the hoped-for benefits.
"What drives the success or failure is how well thought out the integration is," said Barrington Associates Managing Director Ed Bagdasarian. "What is the key asset? Often it's the people who made that company successful.... We see the clash in culture being the No. 1 reason for failed transactions."
San Jose-based EBay's purchase of Skype is intended to propel the leading online auction site into new markets: namely, international e-commerce and Internet-phone services.
Skype, based in Luxembourg, was founded by Niklas Zennstrom and Janus Friis, the two technologists who created the Kazaa file-sharing program. Skype offers a free program that lets its 54 million registered users make voice calls from their computers. Its fee-based services, which let users call people on regular phones and use voice mail, generated $7 million last year. Revenue is expected to hit $60 million this year.
EBay Chief Executive Meg Whitman said she met Zennstrom at a conference in China in May, and the two quickly realized that their companies would fit together.
