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Big buyers of tech products don't necessarily benefit from the industry's acquisition spree
By JORDAN ROBERTSON
AP Technology Writer
(AP) 11:16:41 AM (ET), Monday, July 5, 2010 (SAN FRANCISCO)
The world's largest technology companies have been on a buying spree, spending billions to snap up smaller companies. And often the buyers say they're doing it for their customers _ businesses, hospitals, schools and government agencies.

As tech companies get bigger and bigger, they say, they can offer a broader variety of products and make it easier for their customers to do one-stop shopping.

Yet if you ask the customers, you hear a different story. Often they get new headaches with multibillion-dollar deals by the likes of Oracle, IBM, SAP, Dell and Hewlett-Packard. When you add the challenges that come with any corporate acquisition, it's not hard to envision a reverse trend eventually building: a drive to split up tech companies that have grown too large.

In other words, the tech consolidation of the past few years could turn out to have wasted shareholders' money.

"The demand is not coming from the customers," says Gopal Khanna, who oversees a $600 million technology budget as chief information officer for the state of Minnesota. "On the contrary, I'm best served when there's a phenomenal amount of innovation happening. ... Sometimes creating behemoths slows down that innovation engine."

Technology companies have spent more than $350 billion buying other companies worldwide over the past 3 1/2 years, according to Capital IQ, a division of Standard & Poor's.

Hewlett-Packard Co., the world's biggest information-technology company by revenue, has been one of the most active, in a hunt for more profit in markets other than printer ink. So has Oracle Corp., which wants to sell more types of business software and now makes computer servers after its $7 billion pickup of Sun Microsystems Inc. IBM Corp. plans to drop $20 billion over the next five years on acquisitions to strengthen its services and software divisions.

The companies making these deals say they want to give their customers more options, better prices, and smarter service. It's somewhat like buying Internet, cable TV and telephone service from one company instead of three: You'll save money by buying the bundle, and when you need things fixed you have only "one throat to choke," in tech-industry parlance.

The flip side is that a customer accustomed to dealing with a specialty maker of software or hardware often gets worse service after that supplier is taken over.

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* That's how big internet/electronics/tech companies roll sometimes. *

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