In the dark on Big Blue’s buys

Contact: Brenon Daly

At the risk of stepping into a Kantian dialectic on ‘materiality,’ we can’t help but comment on the fact that when IBM does a deal – even a semi-large deal – mum’s the word. So far this year, Big Blue has picked up two companies that were large enough to consider going public at some point, with each acquisition costing the company around $400m in cash (according to our estimates). Yet in both the purchase of Initiate Systems and BigFix, IBM declined to disclose the price.

Viewed from the Big Blue side, it’s understandable that a startup like Initiate or BigFix, both of which were generating less than $100m in sales, is hardly a significant addition to a tech giant that’s going to post about $100bn in sales this year. Further, even though $400m sounds like a lot of money to most of us, we have to remember that IBM generates that much in cash roughly every two weeks. So, the thinking goes, Big Blue is well within its rights to not disclose ‘immaterial’ transactions. (That’s a view shared by Apple, for instance, which we have taken to task in the past for being run more like a private fiefdom than a public company.)

However, as is often the case in arguments based on relativism, there’s a distinct lack of accountability in it. After all, IBM is spending other people’s money. Shareholders own the company and, at least theoretically, the executives and management at the company – including all those who had a hand in the deals – work for shareholders.

Not to get overly sanctimonious about it, but in deals like Initiate and BigFix, IBM’s true owners are in the dark about how their employees are spending their money. And we’re not talking about dipping into the petty cash jar, but emptying hundreds of millions of dollars from the corporate treasury. That seems to us to be a fairly significant event.