IBM looks at acquisitions

Deal-making is very much in the cards for IBM, Chief Financial Officer Mark Loughridge said after the company recently lost an opportunity to buy Sun Microsystems Inc to Oracle Corp.
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"I go through a deal review every week," Loughridge said at the Reuters Global Technology Summit in New York.

"And every week we go through what our strategies are and how we're going to roll them out, and fundamentally move the corporation into new opportunities and value spaces."

With about $12 billion of cash on its books and plummeting values of potential target companies, International Business Machines Corp can afford to go on an acquisition spree.

Since 2000, IBM has spent US$20 billion on more than 100 companies, said Loughridge, who was named senior vice president and CFO in 2004. On average, that works out to more than 12 deals a year.

Loughridge declined to say if IBM will continue or step up that pace this year, but said the economic climate provides a "fertile" hunting ground for acquisitions.

"Valuations are attractive," he said, adding that cash-rich companies have an advantage over other buyers because they do not need to take on debt to do deals.

Technology investors may be cheering that thinking.

"You've got a lot of cash, you're faced with the prospect of slowing double-digit growth," Richard Parower, portfolio manager of the Seligman Global Technology Fund, said of tech giants like IBM, Cisco Systems Inc and Hewlett-Packard Co. The two factors make dealmaking inevitable, he said last week.

But Parower expects mostly small and medium-sized deals below US$500 million in the next few months, as companies adjust to the downturn and make cautious overtures. He said IBM could be interested in a security company such as Symantec Corp or McAfee Inc.

Loughridge said deal sizes for his company could range anywhere between US$50 million and US$100 million for technology startups, to multibillion-dollar acquisitions such as IBM's 2007 purchase of business analytics company Cognos.

IBM had offered roughly US$7 billion to buy Sun earlier this year, but talks between the two companies fell apart on deal guarantees and the fear of extended regulatory scrutiny, sources said earlier.

Instead, Oracle swooped in at the last moment to seal a deal with Sun for US$7.1 billion.

IBM has focused on buying companies that flesh out its software offerings in recent years, and Loughridge said it would continue to do so. But deals could also cut across the other categories – hardware and services – that IBM does business in, he added.

Despite IBM's aggressive stance on dealmaking, the company maintains "strong discipline" when making the decision to buy, said Loughridge.

Technology bankers who have sold companies to IBM before say Big Blue is among a handful of tech titans, including Cisco, that are especially diligent about examining a company's books, fit and culture before buying it.

"'Know your candidate' is a bit of a mantra for us," said Loughridge, who has been at IBM for more than 30 years.

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BY Reuters Staff
Source：Reuters