Buyouts and Mergers to Proliferate in 2009

Today there are quite a lot of lists of predictions for 2009 appearing. This list of 10 predictions for Linux has some ideas that I agree with, including bright futures for embedded Linux, virtualization, Linux-based gadgets and more. (I'm not so sure Linux-based game consoles have a bright future.) It's the first prediction on the list, though, that I think will have a big impact on open source next year: More buyouts and mergers. We are in a business environment right now where people are lulled into believing that very abnormal things are normal. The unwinding of this will be a huge 2009 story in open source and in the technology industry overall.

In mid-November, this post noted that the share prices for Red Hat, Novell and Sun Microsystems were all pummeled to the point that these public open source companies had market capitalizations about even with the amount of cash they have. Since then, Red Hat's shares have bounced back for more than a 50 percent gain. Novell's shares are lower, and Sun's just barely higher.

The reason for the original post there was that at such low valuations, these companies are acquisition targets. They can even be picked up for low prices by large competitors who might just want to shut all or part of them down. In 2009, I think we will see major corrections in these ultra-low valuations, and that could mean acquisitions in the cases of the public open source companies, or mergers and other types of deals.

Sure, sure I've heard the Chicken Littles arguing that it's a brand new era, and things are just going to get worse. I'm not sure about that at all, though. The Dow Jones Industrials have not seen a worse year since Herbert Hoover was president, and many tech companies have had a worse time in the market than the Dow average. When I hear people say that it's just going to get worse, I am reminded of how everyone in early 2000, coming off an 80+% percent return on the Nasdaq, said things were just going to get better. It was a new era. We all know what happened next.

So this is one of my major predictions for 2009, for the tech industry and open source: As the markets and business environment correct themselves, mergers, acquisitions and consolidation will change the landscape. The fact that open source is doing well will contribute to this. I'm making a note to check back on this next December to see if it played out.