NEW YORK, USA: Quite a few technology companies could lose their independence in the next year or so as the battle among industry giants IBM, Hewlett-Packard Co and Cisco Systems Inc heats up.

The weak economy notwithstanding, Cisco this week announced its entry into the computer server market now dominated by HP and International Business Machines Corp.

And IBM is in talks to buy high-end server maker Sun Microsystems Inc, sources with knowledge of the matter said on Wednesday.

As these companies deliberately step on each other's toes to search for growth, analysts and bankers say the deals market is warming up with cash-rich tech powerhouses hunting for niche technologies at bargain prices.

Virtualization software maker Citrix Systems Inc, storage company NetApp Inc, and network equipment makers Brocade Communications Systems Inc and Juniper Networks Inc are among those that could catch the eye of tech bellwethers looking to compete in new markets, analysts said on Wednesday.

"If I own 60 percent of a market, maybe I can get to 65 percent, but really, I need a new market," said Peter Bell, a venture capitalist at Highland Capital Partners, of the dilemma that faces maturing tech companies.

Morningstar Inc analyst Rick Hanna agreed: "They're all in the war for increasing the total addressable market."

The biggest tech companies have been trying to become one-stop storefronts for business customers for years, offering software, services and hardware for everything from the data center to the desktop as their own core businesses slow down.

The larger impetus behind any deal making is the advent of two hot trends: virtualization and "cloud computing."

Virtualization software lets businesses reduce space and energy usage in their data centers, while cloud computing technologies let them access applications over the Web. Data centers house computing equipment used by companies.

The "arms race" among companies like Cisco, HP and IBM did not happen overnight, Jeff Bistrong, a technology banker at Harris Williams & Co, an investment banking firm said on Thursday.

HP's purchase of technology outsourcer Electronic Data Systems last year already pit it directly against IBM.

"What's different is we're in a major recession, enterprise values have been significantly diminished," Bistrong said.

Companies held on to their cash in the past few months as they assessed the damage to their business from the recession, said Howard Lanser, a mergers and acquisition analyst at Robert W. Baird said on Wednesday.

But now, the price tags of targets are cheap enough to justify longer-term strategic goals and tech companies that have cash will make the "buy decision," Lanser said.

Cisco has $29.4 billion in cash, IBM has $12.7 billion and HP $11.2 billion, according to recent financial statements.

Bargain Hunting

Companies like Microsoft Corp, EMC Corp and Dell Inc also may seek to own choice pieces of the "cloud," as computing becomes more Web-based.

Microsoft has been bullish on cloud computing, but its grip on data center operating systems could be threatened by the move toward remote data centers, forcing the software maker to search for acquisitions, Morningstar's Hanna said.

Microsoft CEO Steve Ballmer said at a conference on Thursday the company plans to buy up to 20 companies this year, with deal sizes ranging from $10 million to $500 million.

EMC, the world's largest maker of corporate storage, may also look for deals to improve its services offering, analysts said.

EMC itself could get acquired by Cisco; the two companies talked about a deal last year, a person familiar with the matter told Reuters in February.

Analysts said the timing of IBM's move to buy Sun illustrates the partly strategic, partly opportunistic thinking of companies that could drive dealmaking in the next year.

"Cisco has clearly laid out all its cards on the market," said Hanna, referring to the networking giant's plans to sell servers for data centers.

Hanna said he reads the talks as "a preemptive move by IBM to take Sun off the table," to keep rivals like Cisco from getting their hands on a bigger piece of the data center pie.

IBM may be betting that it can do a better job than Sun in taking advantage of these emerging technologies, and use it to compete better against Cisco and HP.

The Wall Street Journal reported that IBM has offered between $10-$11 a share for Sun, the Java software maker, or a total value of $6.5 billion, net of cash.

That's the kind of deal size big companies will be comfortable with as they look to plug holes in their software, services and hardware offerings for enterprises, said Highland Capital's Bell.

Bell, a former chief executive of information storage company StorageNetworks, said small acquisitions were unlikely to satisfy the appetites of large companies.

Rather, companies with market values of between $1 billion and $10 billion would be the focus of acquisitions, he said.

The thinking is more like, "If I can find a larger player, maybe I can accelerate and leapfrog, maybe 12 to 24 months, on my competitor," he added.