Consolidation becomes Silicon Valley buzzword

Net Results: On a cool, bright California autumn morning, the commuters waiting for the 7.35 Menlo Park to San Francisco Caltrain, which runs up and down the west side of San Francisco Bay, sip enormous takeaway café lattés and listen to their iPods.

Just after the 7.16 express roars through - it halts at neighbouring Palo Alto but bypasses Menlo Park as the latter is not quite as high on the Silicon Valley food chain - I see something I haven't seen in a long time. A grown man in a bicycle helmet arrives on the opposite platform riding one of those fold-up silver push scooters that were all the rage in 1999.

Yes, a grown man, someone who in some other life, in some more normal place - Dublin, say - would be of an age by now to have worked his way up to a secure place in the Civil Service, a mortgage on a little three-bed somewhere in Meath or Kildare, and perhaps have a small child to whom he might have given just such a scooter on his fifth birthday.

But no: this is Silicon Valley, where adolescence ends at 40. This is a legitimate mode of eco-friendly transport, and he folds the silly thing up while he awaits his commuter train to Santa Clara or Sunnyvale or San José, to head into some company which no doubt still has an indoor Nerf basketball court, a serve-yourself espresso machine imported from Italy, and lots of male employees whose cubicles are bedecked with action figures from the past two decades of computer- generated feature films.

The fellow is testimony to the fact that there's something about the frivolity of the dotcom era that just refuses to die in Silicon Valley. In some ways, that's good - as far as I am concerned, the world needs more advertising billboards for digital products that crack insider geek jokes, more companies that will make something incredibly cool, such as the Google Earth toolbar, and offer it for free just because other people will have a lot of fun with it, and more generous employee benefit schemes.

But despite the appearance of the odd silver scooter, this isn't your pre-bubble Valley any more, and nowhere is this more obvious than in the business pages of the region's newspapers.

Yes, the economy around here is growing healthier, and yes, tech hasn't gone away, you know. But it sure has changed.

Where once the papers were full of imminent initial public offerings of fresh young companies, now the buzzword is consolidation. Mix, meld, integrate. Takeover, merge, swallow.

Back in the boom era, lots of people talked consolidation, and how the industry was ripe for it, but it didn't really happen, outside of a few giants. For example, Compaq ate Digital, then HP got the final meal and devoured Compaq, placing a full stop to a sentence that had brought together years of tech industry consolidation along the venerable Digital trajectory (though who knows, maybe it's only a semicolon and this tech-giant chow time will continue).

And of course, Microsoft was always out there, the Atlantic Dawn of the tech sector, casting out wide nets and sucking in the big and small fish that would be or could be or should be interesting, processing them into the factory ship and then waiting to see which were keepers and which to cut loose.

But not much happened for the past few years, post downturn, except for larger companies sweeping up a few dotcom crumbs here and there.

Now, the Valley is full of real consolidation buzz. It's not that more consolidation is happening, it's that the size of the deals is a lot bigger. In 2004, 1,664 deals worth $60.12 billion (€49.20 billion) were done, whereas so far in 2005 there have been 1,205 deals worth $69.58 billion, and analysts are predicting the total will likely reach $75-$80 billion by year's end. Well-known companies are buying up other well established names rather than those familiar only to those who hang around in venture capital circles and buy tech business magazine Red Herring.

With its recent announcement that it will snap up rival Siebel, Oracle - holding its annual user conference this week in San Francisco with 35,000 attendees ("The size of a small city. We could elect our own Congressperson," as Oracle president Charles Phillips quipped) is, in a way, a self-fulfilling prophecy.

Chief executive Larry Ellison has been talking about the imminent arrival of big-time software industry consolidation for the past few years, and is now precipitating it by sinking talons into PeopleSoft, and then, more recently, Siebel - in all, 10 companies bought in the past year, with the company hinting this week that it is still on the hunt for more.

Analysts say the software industry has begun the consolidation phase we've already seen in hardware - PCs and disk drives for example have already experienced this in the 1990s and the start of this century.

In addition to the Oracle big buys, the past year has seen Lenovo buy IBM's personal computing division, eBay buy Skype, Symantec buy Veritas and Sun buy StorageTek.

All this fun isn't limited to the big guys. Analysts in the Valley are saying tech shares are trading at a far lower level than during tech's end of century heyday - so it might be a good time to buy a little piece of the action yourself.

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