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From Data Centers to Private Clouds

Three companies are poised to be acquired as private clouds soar.

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The mergers and acquisitions wave sweeping through technology-land could get larger before it subsides. The tangible economic benefits of cloud computing are driving IT investments as traditional enterprise data centers are transformed into private clouds. With server and storage virtualization as the core building blocks, private clouds offer large enterprises a step change in the efficiency of their data centers without the perceived risks associated with evolving lower-cost public cloud services.

The IT industry had long expected these investments in private clouds, but  Oracle's (ORCL) aggressive efforts to capture a larger portion of the IT spending has left most of its competitors on the defensive. Oracle's strategy of selling integrated hardware plus software solutions has exposed the software gaps in competitors' portfolios, as can be seen in the graphic below, and is forcing them to revisit their own strategies. Already  IBM (IBM) has made an acquisition offer for Netezza (NZ) to combat the tremendous market success of Oracle's Exadata appliance, and  Hewlett-Packard (HPQ) has installed a new CEO and a new chairman, both long on software industry experience. We expect a continuing wave of hardware and software acquisitions as rivals including IBM, HP,  Dell (DELL),  Cisco (CSCO), and  EMC (EMC) design competitive responses to Oracle's integrated solutions approach.

Sunit Gogia does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.