Indian Software and IT players expected to feature in IBM's $20 billion (Rs.93,660 crore) acquisition drive

International Business Machines Corp. (IBM) is looking for viable investments in India and globally in its ambition to double its earnings in five year time period through expansion in new and emerging economies, with a focus on software and services. The company has an estimated $20 billion, about Rs 93,660 crore worth of investment funding that it intends to use in the expected Indian and global acquisitions.


IBM’s CEO had earlier laid out the company’s strategic plan that included acquisition-led growth at its investor get together in May. Craig B. Hayman, IBM software Group general manager, said the company is being very acquisitive and is keen on companies that might have viable investment propositions for it. He was speaking in Mumbai during the integration of employees from Sterling Commerce with IBM as it had earlier acquired the company from AT&T Inc. for $1.4 billion in cash. This acquisition was part of continued investment acquisition plan aimed at expanding IBM’s portfolio of software for companies in financial services, manufacturing and retail.


In May, IBM CEO, Palmisano said the company plans to spend $20 billion on acquisitions over the next five years with IBM’s operating earnings expected to rise by at least $20 per share from $11.35 or more in 2010. IBM’s software group generated around $21 billion of its total revenue of $95 billion for the year ended December, 31st.


The company’s main channels of revenue are computer hardware, information technology services (IT) and software products. To date, the company has only made two Indian acquisitions, acquiring Daksh Services, a business process outsourcing firm, for an estimated $170 million in April 2004, and its November 2005 acquisition of Network Solutions Pvt. Ltd, an IT infrastructure Services Company, for an undisclosed amount.


Even so, the company’s Software segment general manager, Mr. Hayman, did not disclose whether IBM was currently looking at any particular Indian company as a possible acquisition, but pundits believe that companies with propriety software products that target small and medium enterprises might be possible acquisition targets for IBM.


According to industry pundits, IMB has traditionally been large enterprise focused, with skill sets and products that auger well with it and as such, as it grows and moves forward, the company would seek to cater more for SMEs for it to successfully turn demand into revenue channels in emerging markets such as India’s. However, India has no shortage of successful software product vendors to meet its SMEs demand that IBM might consider viable acquisition targets, added the analysts.


June 15, 2010.