DEALTALK-Tech companies stick to safe deals

By Anupreeta Das

SAN FRANCISCO (Reuters) - Technology companies may have wooed rivals with alluring, pricey buyout offers in 2008, but this year, nothing says sexy like safe deal-making.

With no signs of imminent economic recovery, tech companies are focused on producing decent earnings and trying to cope with slumping stock prices and thrifty customers.

When they assess opportunities to buy rivals, companies will be more cautious, preferring to do deals that don't use up all their cash, and where the target company has a healthy, cash-generating business that can be digested painlessly.

That means 2009 could well be the year of small- and medium-sized deals, bankers and venture capitalists said.

There could be a sprinkling of multibillion-dollar acquisitions, especially if Microsoft Corp (MSFT.O) resurrects its bid for Yahoo Inc (YHOO.O), but supersized plays will make up a smaller percentage of the volume of technology deals this year, compared with the past five years, they said.

Bankers said they are thus gearing up for business in the "middle market" -- loosely defined as deals below $500 million (343 million pounds).

"Large, cash-rich strategic companies are unlikely to make large, transformative acquisitions," said Jeff Bistrong, who heads the technology group at investment banking firm Harris Williams. Rather, he expects more "bite-sized" acquisitions.

"Most (companies) will keep as much dry powder and liquidity as they can because of the indeterminate duration of this downturn," Bistrong said.