Climate for tech mergers warms up

There could be a thaw in the months-long stagnant market for tech mergers and acquisition.

Data-storage companies EMC emc and NetApp are dueling to buy Data Domain for at least $1.8 billion. Last week, chipmaker Intel intc said it would buy testing and development software maker Wind River Systems for $884 million.

The quarter's big catch was when Oracle orcl snapped up Sun Microsystems for $7.4 billion.

While hardly a buying spree, the uptick could signal a break for what has been a sluggish tech M&A market since the third quarter of last year.

So far, $17.9 billion has been spent on tech mergers in the U.S. in the current quarter — more than the previous two quarters combined, according to market researcher Thomson Reuters.

The activity reflects one byproduct of a sour economy: Big tech companies sitting on piles of cash are willing to spend some of it to aggressively pick up innovative start-ups as well as rivals with customers and market share.

The deals come at a time when venture capital funding is scarce for start-ups and there are scant initial public offerings.

"People historically make their money when they invest consistently, even during downturns," says Keith Larson, vice president of Intel Capital, the company's venture-capital arm. The company has said that it will spend $7 billion over two years to build advanced manufacturing facilities in the U.S.

"Almost the worst thing you can do is pull back during a downturn and miss out on buying opportunities," Larson says. "We have a multiyear road map on the technology side."

Cisco Systems CEO John Chambers, who has navigated the venerable network-equipment maker through several downturns, has said companies willing to take calculated risks often emerge stronger from recessions.

A few established companies with ample cash reserves this year have bolstered their war chests with the intention of snapping up companies.

Cisco csco, which sold $4 billion in bonds in February, has about $33.5 billion in cash reserves. It acquired Pure Digital Technologies, maker of the popular Flip video camera, for $590 million.

"If you have cash, it is a good time to fortify product lines and fuel growth," says Cynthia Ringo, managing partner for VC firm DBL Investors.

So far this quarter, there have been 239 deals in the U.S., including the Oracle-Sun blockbuster. In the first three months of this year, there were 313 deals.

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