Today IBM announced that they were acquiring FileNet Corporation for $1.6 Billion.  IBM hadn’t signaled that there would be this kind of acquisition activity on the horizon.  This is IBM’s third acquisition in 2 weeks.  IBM’s software group has bought more than 50 companies in the past 10 years, and this is IBM’s largest purchase in more than 4 years (since they bought Rational).

(edit 9/13/2006 - I decided that rather than read my post, you’d be better served checkin out Sandy Kemsley’s post on the acquisition. It’s easy to read and very exhaustive.)

Russ Statler, who on his blog gave this explanation of IBM’s ECM software:

Right now the IBM ECM offering is still many moving pieces that have been picked up by acquisition and still have not been completely absorbed or integrated into a cohesive single architecture. Adding FileNET to this mix will only prolong this effort and make thing more complex thereby adding to the implementation costs for customers.

Bottom line: I do not think this will make ECM better for FileNET customers and the value to IBM customers is questionable.

 

I tend to agree with that assessment, though if IBM didn’t snap them up, someone would have. I think IBM is buying marketshare and credibility as much as technology. In that respect I’m in no position to assess whether the move was right or not.  I suppose time will tell. An analyst for JP Morgan told marketwatch that he thought the deal made strategic sense and that the price was fair.

Stats:

Price: ~ $1,600,000,000
Premium over market:  ~ $150,000,000
Deal Closing Date: Q4 2006
FileNet 2005 ECM sales: $160 million (total revenue of 422 million also includes customer support and services income)
IBM 2005 ECM sales: $291 million
EMC 2005 ECM sales: $362 million
IBM / FileNet Combined: $451 million, retaking the #1 market position

Noteworthy:

FileNet shares are trading several percent above the $35 sale price, indicating that some people are expecting a higher offer.

UPDATE: 8/11/2006 - Businessweek has a good article about IBM’s shopping spree and the battle for most-valuable-software-provider status.  Of note, it mentions some possible reasons for the buy (competitive advantage vs. Indian Outsourcing and adding more value than EMC could)

Tags:, ,