COVID-19 as an Opportunity... US IT Giants Expanding Their Size

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Despite the COVID-19 pandemic, major U.S. information technology (IT) giants are expanding their scale based on their formidable financial strength. This is the fastest pace seen in recent years.

According to global financial information company Refinitiv, Alphabet, the parent company of Google, Amazon, Apple, Facebook, and Microsoft (MS) have announced a total of 19 mergers and acquisitions (M&A) since 2015 up to the 26th of this month.

This contrasts sharply with the behavior of IT companies during the 2001 recession and the 2008 global financial crisis, when they significantly retreated from large-scale M&A following sharp stock price declines.

Despite the COVID-19 crisis, the active M&A activities of U.S. IT giants are seen as moves to further solidify their market dominance based on substantial cash reserves. As of the end of the first quarter, the total cash and cash equivalents of the five major IT companies were estimated at $560 billion (approximately 690 trillion KRW).

[Image source=AP Yonhap News]

The most aggressive player is Facebook. Recently, Facebook acquired image content company Giphy for $400 million with the aim of integrating its image library into applications such as Instagram. Considering that Giphy generated $19 million in annual revenue before being acquired by Facebook, Facebook paid more than 20 times that amount.

Additionally, in March, Facebook invested $5.7 billion in 'Jio,' the telecommunications division of Reliance Industries, one of India's top three conglomerates. This investment secured a 9.9% stake in Jio, making Facebook the largest shareholder. This move is interpreted as an effort to capture the rapidly growing e-commerce market in India.

Amazon is in preliminary talks to acquire the autonomous driving startup Zoox.

Two years ago, Zoox, an autonomous vehicle company valued at $3.2 billion, was the target of preliminary acquisition talks. Apple acquired virtual reality (VR) technology company NextVR and machine learning startup Inductive. Uber also acquired a 16% stake in electric scooter company Lime for $85 million. MS purchased telecommunications technology company Metaswitch Networks to strengthen its cloud business. Additionally, MS officially announced the acquisition of Softomotive, a startup in the robotic process automation field.