IBM Acquires BigFix - Analyst Blog

Information Technology (IT) giant, International Business Machines Corp. (IBM) signed an agreement to acquire security and corporate IT compliance software provider BigFix Inc. for an undisclosed amount. According to Bloomberg, IBM paid a whopping amount of approximately $400.0 million for the deal.

Pressed with ever increasing security and compliance issues, business organizations across the globe need to upgrade their security software on a continuous basis. The complex IT structure involving thousands of personal computers, servers and laptops has been rooted as the primary cause behind these security hazards.

Moreover, organizations also need to identify devices, which are not in compliance with their IT policies, as this may jeopardize business activities on a regular basis.

BigFix software not only improves visibility but also offers more control to organizations to solve these problems in a considerably short span of time. BigFix readily identifies non-compliance and security breach, and recommends security and software updates to 500,000 machines in a very short span of time. BigFix enhances organizational capability to manage critical applications to maintain a healthy system.

We believe BigFix acquisition will boost IBM’s security and software offerings. BigFix will contribute to IBM’s security solutions by distributing and managing clients’ anti-virus, anti-malware, firewall and network access control software on any leading operating system such as Windows, Macintosh, Linux and UNIX, avoiding customized solutions in the process, thereby saving cost.

Moreover, BigFix’s power management technology will aid IBM customers to automatically configure and shutdown desktops overnight and monitor print usage, saving thousands of dollars in energy usage and avoid environmental degradation.

The acquisition is expected to be completed in the third quarter of 2010. BigFix will be integrated into the IBM’s Software Group. BigFix has more than 700 clients, including federal, retail, entertainment, healthcare, education and financial services. We believe IBM’s market share in the security software business segment will further expand going forward.

IBM continues to proceed with its strategy of accretive acquisitions that can be easily integrated into its current business. IBM plans to spend approximately $20.0 billion in acquisitions over the next 5 years.

IBM acquired approximately 108 companies since 2000 for a total of about $22.0 billion, all of which have been profitable. The company made 26 strategic acquisitions to strengthen its portfolio. Since 2005, IBM has invested $10.0 billion, or $8.5 billion net, in 14 strategic acquisitions to build its business analytics capabilities. Since 2006, IBM has acquired 11 companies, including BigFix in the security related field.

We believe, IBM will continue to acquire companies with higher intellectual property especially in the software arena, going forward. Notably, IBM acquired three software companies in the past three months, expanding its portfolio in web analytics and cloud computing.

Although IBM benefits from a strong liquidity position, operational efficiency, substantial free cash flow and earnings momentum, IBM faces stiff competition from Hewlett Packard (HPQ), Accenture Plc. (ACN), Oracle Corporation (ORCL), VMware Inc. (VMW), Google Inc. (GOOG) and Microsoft Corporation (MSFT) in most of its markets. We maintain a Neutral rating on a long-term basis.

IBM has a Zacks Rank of 3, which implies a Neutral rating on a short-term basis.
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