For Big Blue, What Comes Next?

By Renee Boucher Ferguson  |  Posted 2006-08-24 Email Print this article Print

In announcing its latest acquisition, analysts believe IBM is looking for new markets to grow its business, but the results are far from certain.

In less than three weeks, IBM managed to snatch up four software companies—Webify, MRO Software, FileNet and, most recently, Internet Security Systems.

The question is, How will these diverse acquisitions fit into IBM's overall growth strategy?

The acquisitions of Webify and FileNet are expected to increase the Armonk, N.Y., company's Information on Demand strategy, while MRO Software will help with asset and service management. And, the $1.3 billion purchase of ISS is expected to increase Big Blue's global security services business.

ISS, based in Atlanta, is a maker of network security and appliances that specializes in intrusion detection and other systems scanning technology. Once the deal, announced Aug. 23, is complete, probably sometime in the fourth fiscal quarter, ISS is expected to be added to IBM's Global Services division and, IBM officials hope, give a boost to the company's security product line.

Like rivals Oracle and EMC, IBM has been using acquisitions to shore up its business and expand products lines within security and other spaces, while revenues from traditional, core sectors have slowed.

Most analysts believe that strategy will work for IBM, but there are some doubts.

"We believe the [ISS] deal makes strategic sense, though the price tag is likely to be interpreted as high," Bill Shope, an analyst with J.P. Morgan in New York, wrote after the $28-per-share ISS acquisition was announced.

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