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The earnings season has an added twist of drama this quarter. US multinationals are paying more tax than usual, adversely affecting their bottom lines, as they repatriate billions of dollars to the US.

Computer Associates, Lexmark International and Citrix International are just three tech-sector players who - like their cousins elsewhere in the US economy - are paying tax on money that they had housed abroad and are only now bringing back on shore.

Next month, IBM will join the club. Next quarter's results will see a $450m tax hit as it repatriates $9bn to the US.

IBM, CA, Lexmark and Citrix et al are taking advantage of tax breaks under the American Jobs Creation Act, passed by Congress in 2004. This grants US companies that hold money offshore a temporary tax break to bring back their money and invest it in the domestic marketplace. Congress was reacting to the outcry and concern generated by outsourcing.

Progress has been poor, though, as companies have either been slow to put practices in place to return the cash or have been holding out for favorable exchange rates. Collectively, US companies have announced plans to bring back up to $250bn. Since the amnesty started, maybe a fifth of that figure has gone stateside, according to estimates.

But time is running out as the tide of cash flowing back into the US is likely to increase. That means a short-term tax hit, albeit at a much-reduced rate, for vendors.

Depending on how deep the government's tax break goes, the vendors in the enterprise software market are likely to feel the pain most, as costs and operations become squeezed. This market has been hit by profits warnings, failure to meet the expectations of Wall Street analysts, slowness to close deals, and declining business from sales of product licenses during the last two quarters .

All this makes the market a lot more comfortable for platform providers such as Oracle to operate. Oracle wants to expand its customer base, technical expertise and vertical expertise through acquisition, by picking off smaller companies or those having problems executing.

More M&A anyone? ®

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