The Software Sector Is Ripe for M&A

 | Jun 02, 2014 | 3:15 PM EDT
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You need a takeover in the software space. You need Oracle (ORCL) to step up and buy Concur Technologies (CNQR) and then get into a bidding war with IBM (IBM) over it.

You need IBM to take advantage of the Splunk (SPLK) decline to get better at analytics.

You need ServiceNow (NOW) to combine with Workday (WDAY) for automated workflow, finance and human capital software.

Don't laugh. We used to get these deals all of the time. There used to be consolidation galore. There are simply too many players now to be able to keep them all straight, and if you can't keep them all straight, then you don't want to own them..

Almost all of them are down today, giving up much of the gains that were made in the last 10 days. It is almost as if people must have heard there would be a deal in the space this weekend, and it didn't happen, so they sold.

I think there's a lot of excitement in the group but not much value. The only stock of any consequence that has held up under the onslaught is Zillow (Z), which received not one but two downgrades today, and it meant nothing to it. Sure, the stock has a lot of shorts in it, but that's ridiculous, as two downgrades would have sent Workday down $10.

There will come a time to own these stocks. They just aren't there yet. You need lower valuations and takeovers. We don't have either, yet.

But I think the acquisitions are on the horizon. 

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