Cisco Systems Inc. is hardly your ordinary acquirer of technology companies. With $33 billion in cash and equivalents and a track record of 133 acquisitions since it snapped up its first company in 1993, it's no stretch to say Cisco wrote the book on tech M&A But when the San Jose, Calif., networking equipment giant, which has slowed its pace of dealmaking since the financial turmoil of last year, says its about to start firing up its M&A engines again, the news will likely reverberate through the world of tech buyers.

"We certainly aren't clear on when the upturn will occur, but we are starting to feel some stabilization," says Charles Carmel, Cisco's vice president of corporate business development. "Stable footing for us and potential targets mean we will be more active in the second half of this calendar year than the first half ... and we'll do more this year than last."

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Many technology M&A bankers share Carmel's outlook, though cautiously. With stock valuations leveling to some degree, a market for initial public offerings that is taking tentative steps forward and certain technology markets that are ripe for consolidation, acquirers, targets and their advisers have begun to realize that they are dealing with a more stable, though still challenging, new reality.

"When the shit storm happened in October, a lot of companies put their heads in the sand to let that storm blow over," says Rex Sherry, a partner with America's Growth Capital LLC and co-head of the Boston-based firm's West Coast investment banking. "Now they see that the storm hasn't necessarily blown over, but we're not heading into the abyss either."

The raw numbers so far this year haven't been particularly promising. Last year, 2,670 technology deals -- excluding telecommunications M&A transactions -- worth an aggregate $142 billion were struck, according to data from the 451 Group. As of late May, 989 transactions valued at a total of $32 billion have been announced. While the number of deals is on track to be comparable with last year's, the last few months of 2008 saw a precipitous drop-off in that tally, thanks to the succession of financial disasters that rocked the market. And so far this year, the average price tag of a deal has been cut nearly in half compared with last year.

Certainly, the dealflow this year has been accentuated by some large, significant transactions, prompted not only by low stock prices of targets, but by overarching trends in technology development and large corporations' need for new growth avenues. Different technologies in the corporate data sector have been converging, and the turf war to supply those technologies led Oracle Corp. in April to an agreement to buy Sun Microsystems Inc. for $7.1 billion.

There's no doubt that the past several months have presented opportunities for buyers, at least theoretically. According to recent research from Boston Consulting Group, acquisitions in a downturn provide shareholders with returns 14.5% higher than those in deals struck in rosy economic times. But the problem has been agreement on valuations. The deep freeze in the last quarter of 2008 has created a dearth of comparable transactions to help value a deal.

Couple that with the volatility of stock prices, and it has been extremely difficult for buyers and sellers to agree on a price.

"The biggest issue has been understanding valuations in a vacuum," says Jason Hutchinson, managing director of M&A and the head of Houlihan, Lokey, Howard & Zukin Inc.'s global technology group.

Not only have sellers been wary about being undervalued, but buyers have been extremely cautious -- some might say paranoid -- about any surprises that might crop up in a target.

"Everybody is so risk-averse that you have to labor very hard if there is any imperfection," says Chad Keck, vice chairman of Needham & Co. LLC. Keck, who runs the New York investment bank's Menlo Park, Calif., office, tends to represent selling companies in the semiconductor industry, and a recent deal exemplifies the challenges that his clients face.

LogicVision Inc. hired Keck in 2008 to conduct a strategic review for the publicly traded chip design software maker. Larger rival Virage Logic Corp. in December made an unsolicited, $10 million offer for the company but withdrew the bid two weeks later after LogicVision rejected its advances.

Soon after, LogicVision entered deal talks with Mentor Graphics Corp., one of the top three chip design software firms. But it would take more than two months to iron out all the wrinkles in that friendly deal.

"We had the fundamentals of a combination very early after rejecting the Virage offer, but it basically took us between December and May before we could announce anything," Keck says. "The problems we had to deal with to get everything ready for signing were very surprising to us."

The hard work appears to have been worth it, though.

Mentor on May 7 announced an agreement to buy LogicVision for $13 million in stock, a 30% premium to Virage's rejected offer.

As Virage found out, adding a hostile element to the already challenging process of reaching a deal makes success extremely elusive. A handful of much larger hostile attempts have reached the same conclusion over the past 12 months, including Samsung Electronics Co. Ltd.'s attempt at SanDisk Corp., chipmaker Vishay Intertechnology Inc.'s unsolicited $1.7 billion bid for International Rectifier Corp. and chip design software maker Cadence Design Systems Inc.'s $1.6 billion cash takeover attempt of rival Mentor Graphics.

Successful hostile takeovers are rare in technology, though they have gained surprising popularity. Seven of the 10 biggest bids for technology companies last year were unsolicited, but only one succeeded -- Oracle's $8.35 billion purchase of BEA Systems Inc. in January 2008. These attempted raids fail because most of an unwilling target's assets can walk out the door.

Also, a target that is intractable in private valuation discussions is just as likely to be so in public -- and, in most cases, so will its shareholders -- and the odds get quite long.

Yet some wonder if now isn't the perfect time to strike hostile deals. Storage sytems provider EMC Corp. is trying to break up NetApp Inc.'s deal for Data Domain Inc. via an unsolicited bid. And then there's networking and communications chipmaker Broadcom Corp.'s $764 million run at smaller rival Emulex Corp. While the would-be target has rejected the overtures (after having staved off attempts at friendly negotiations with Broadcom in December), the deal shows the lengths acquisitive companies are willing to go to take advantage of low stock prices.

"Broadcom is one of the smartest, most forward-thinking and aggressive semiconductor companies on the planet," says Sherry, who was previously head of West Coast technology banking at Bear, Stearns & Co. and Merrill Lynch & Co.'s global head of semiconductor investment banking before that.

Broadcom has nearly $2 billion in cash to increase the bid if necessary, he says, adding that in a generally hiring-averse environment, "Emulex employees won't go across the street, and they'd probably be happy to have Broadcom stock instead of their own."

The argument makes sense, especially when viewed in light of another failed unsolicited takeover offer.

Yahoo! Inc.'s unwillingness to succumb to a $48 billion overture by Microsoft Corp. seemed foolish soon after the Redmond, Wash., software giant dropped its $33 per share offer a year ago and doesn't seem too much smarter now, with Yahoo!'s shares trading at around $15 each.

Can Emulex, despite its defense of offering predictions of strong independent growth in its data center technology products, in good conscience potentially put its shareholders through the same? It's a risky gamble.

So far this year, Cisco has announced and closed three acquisitions, the largest being the $590 million stock purchase of digital video camera maker Pure Digital Technologies Inc., which closed May 21. It did only five in 2008 before the financial markets seized up in October, and 11 the year before.

So it's not a stretch for Carmel to say the company will top last year's number of deals in 2009.

But it took a lot to slow Cisco down from its usually fervent pace of M&A. The company prides itself on a consistent and aggressive approach to its investment, partnership and acquisition strategies in rising and falling markets, Carmel says. But the chaos of late last year sidelined even this accomplished acquirer. "At the end of the last calendar year, it was so turbulent that it was difficult to get stable and go into action mode in M&A," he says.

With a slightly calmer environment, there will certainly still be hurdles for Cisco and other corporate acquirers. But the difficulties will be slightly different now, Carmel says. "The challenge for our organization is recognizing that just because something is for sale doesn't mean that it is the right thing to buy," he says.

"There certainly are a lot of things for sale now."