IBM Eye

There has been talk in a few circles about IBM continuing to acquire security firms. I don’t know very much about this side of the business. I know that it’s a huge source of consulting revenue and an essential component in virtually every contract they bid. That said, I sure hope IBM doesn’t overpay for a stronger foothold into the market. I was a little disappointed that IBM bought Cognos, but I\’m not sure they had any choice. $5B was a tough pill to swallow though. I saw a blog post (seemingly by someone hoping to profit from the sale) about an Israeli company called Check Point.

Until now, the thought on the Street was that Check Point was going to continue as a stand-alone company, but with IBM on the prowl, it may be too much for CEO Gil Schwed to resist. Check Point currently trades at a market cap of $5.53 billion, and an acquisition would certainly come with a much higher price tag. Based on valuation, it would take between $7-8 billion to buy the company. For deep-pocketed IBM, that’s not too high a price. For Schwed, a takeover at that price would be tough to reject, and it would break all records for M&A of an Israeli company.

I think IBM has done a pretty decent job of balancing new acquisitions, integrating past acquisitions and organic top line growth over the past few years. Cognos will likely stretch and test that record because of the sheer size of the pill. The security firms rumored include Check Point, McAfee, Websense and SonicWALL. Websense and sonicwall are $900M and $450M respectively, and IBM has bought firms of that size with alacrity while avoiding investor rumblings. McAfee and Websense are north of $5B, making for (potentially) the largest ever target for big blue. I’m not sure that the time is right for throwing around such coin. Most acquisitions only enrich the acquired and hardly ever benefit the customer. Just slow down IBM. Digest for a little while.