Summit Notebook

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IBM: No Sun, but there are other fish in the sea

May 19, 2009

IBM’s Chief Financial Officer Mark Loughridge didn’t have much to say about Oracle’s planned purchase of Sun Microsystems at the Reuters Global Technology Summit.

I don’t see that much has changed in this. They have been partnering for decades. It doesn’t fundamentally change the position” in the industry.

Loughridge also wondered aloud how Oracle was going to handle Sun’s hardware business, given that its expertise is in business software.

I think it’s going to be pretty tough to just announce that you’re now going to be a hardware business. It’s a fundamentally different business… it’s not like you have a track record in managing that kind of acquisition.

As you may recall, IBM lost out to Oracle in the bid for Sun Microsystems. The world first came to know a couple of months ago that IBM and Sun were in exclusive acquisition talks, but those discussions fell through because of differences on deal guarantees and fears of extended antitrust scrutiny. Soon after, Oracle and Sun announced their $7.4 billion deal, and sources told Reuters at the time IBM didn’t know this would happen until the night before the announcement.

Were Loughridge’s comments to Reuters a case of the proverbial sour grapes? Analysts have already said they expect IBM to now be even more acquisitive. Big Blue has the cash to do it and Loughridge said the M&A landscape was “fertile” at the moment, with valuations very attractive.

We looked at acquisitions back in the mid-1990s as opportunistic.

But since 2000, IBM has spent some $20 billion to acquire more than 100 companies — that’s an average of 12.5 deals per year — and Loughridge’s comments suggested he was in no mood to slow down that pace. Dealmaking is “an operational part of our business” now, he said.

And the opportunities are plenty, for deals of all sizes — from the tiny $50 million-$100 million purchases to large acquisitions like IBM’s 2007 purchase of Cognos for $5.3 billion — Loughridge said.

Every week I go through a deal review.

Now, that’s good news for Silicon Valley venture capitalists and their startups, isn’t it?

Photo: Reuters

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