Enterprise Software: Awaiting An Outbreak Of Merger Mania

Nothing gets the Street’s juices flowing like speculative chatter about M&A.

Ergo, there’s lots of discussion this morning about a new report from FBR Capital analyst David Hilal about the prospects for consolidation in the enterprise software sector. He thinks the flow of M&A deals in the group is going to accelerate this year and into 2011. “Software vendors are flush with cash given the cash-flow rich nature of the software model and more than a handful of vendors have even recently raised additional capital,” he notes.

Hilal even provides eight specific deals he thinks would make strategic sense:

• Akamai (AKAM) buys Limelight (LLNW), thus strengthening their position in content delivery networks.
• American Express (AXP) buys Concur (CNQR), provider of expense management software; he ntoes tha the company’s already have a tight partnership.
• Hewlett-Packard (HPQ) buys McAfee (MFE): This one has already turned into a rumor; the theory is that it would strengthen HP’s hand in security software.
• Oracle (ORCL) buys Red Hat (RHT), thus extending its reach into the Linux software market.
• Oracle buy AthenaHealth (ATHN), building on its recent acquisition of Phase Forward to further pursue the health care segment.
• Salesforce.com (CRM) buys RightNow (RNOW), expanding beyond sales force automation software into customer service and support software.
• SAP (SAP) buys Tibco (TIBX), boosting the German software giant’s middleware stack.
• SAP buys Informatica (INFA), in another boost to the company’s software stack.

He then goes on to suggest even more potential deals:

• Automatic Data Processing (ADP), he says, could buy Concur.
• Oracle could buy Amdocs (DOX), Ariba (ARBA), Manhattan Associates (MANH) and/or Parametric Technology (PMTC).
• SAP could buy Salesforce.com.
• Microsoft could buy Citrix (CTXS) or Limelight.
• Google could buy Salesforce or Akamai.
• AT&T or Verizon could buy Akamai.
• Cisco could buy Riverbed.
• Microsoft or Google could� buy Nuance (NUAN).

Among the targets noted in the above list:

• Limelight is down 16 cents, or 4%, to $3.83.
• Concur is up 20 cents, or 0.5%, to $43.24.
• McAfee is up 50 cents, or 1.3%, to $40.63.
• RedHat is up 5 cents, or 0.2%, to $31.51.
• AthenaHealth is down 2 cents, at $37.08.
• RightNow is up 8 cents, to $18.91.
• Tibco is up 13 cents, or 1.2%, to $11.48.
• Informatica is up 5 cents, or 0.2%, to $25.78.