By Kate Gibson
The U.S. stock market's celebration of a renewed burst of
M&A activity proved short-lived Tuesday even as some questioned
the viability of Xerox Corp.'s $6.4 billion bid for Affiliated
Computer Services.
Monday's double-digit drop in the would-be acquirer's stock was
an early indication the deal as proposed may not go through, said
Art Hogan, chief market strategist at Jefferies & Co.
Yet, the deal's possible demise is not necessarily such a bad
thing, Hogan said.
"The good news is there is ongoing consolidation in computer
services, and you can make an argument this opens the door for
another bidder at a higher valuation, that's good for the broader
market," he said.
The recent spurt of M&A activity marks the beginning of a
cycle that should intensify as "tech companies strive to deepen and
broaden their product offerings," said Hogan.
The biggest players in technology in terms of market
capitalization historically have high levels of cash on their
balance sheets, said Hogan. He pointed to Microsoft Corp. (MSFT),
Oracle Corp. (ORCL), Cisco Systems Inc. (CSCO) and IBM (IBM) as
among likely buyers of other companies.
"You don't have to go far to find a pretty big pile of cash for
acquisitions," said Hogan.
Xerox Corp. (XRX) shares on Tuesday rose 3%, taking back less
than a third of the market valuation lost in the prior session's
near-15% slide.
Elsewhere in the IT sector, shares of Unisys Corp. (UIS) gained
1%, continuing Monday's rise of almost 15%, a surge Hogan
attributed to speculation it took might be targeted for
acquisition.
On Wall Street, the major indexes lost their early footing after
an index of consumer confidence fell unexpectedly, with energy and
information technology shares fronting the decline.
The Dow Jones Industrial Average (DJI) fell 28.79 points, or
0.3%, to 9,760.57. The S&P 500 Index (SPX) declined 2.36
points, or 0.2%, to 1,060.62, while the tech-laden Nasdaq Composite
Index shed 9.98 points, or 0.5%, to 2,120.76.