Small purchases add up big for IBM

Contact: Brenon Daly

Shortly after IBM bagged Netezza, we noted that Big Blue had been doing some big-game hunting in recent deals. It turns out that’s also true when it takes aim at private companies. In fact, we estimate IBM has spent more on startups than it has on the public companies it has taken home over the past year.

First, we should qualify a bit of our math. In the past 12 months, Big Blue has announced 17 acquisitions. Included in that flurry of dealmaking is the purchase of a pair of public companies (Unica and Netezza), the pickup of a billion-dollar carve-out (the Sterling Commerce business from AT&T) and the acquisition of 14 privately held companies. IBM has not disclosed a single price for any of the more than dozen private companies it has snared since last October, even though some of them are costing the company – that is to say, its shareholders – several hundred million dollars a pop.

Nonetheless, we have estimates of the price tags of nine of the 14 deals. (These estimates have all been corroborated by at least two sources familiar with the transactions.) According to our estimates, more than half of the acquisitions (five of nine) cost IBM more than $200m each. Altogether, we estimate the nine deals set Big Blue back $2bn. That incomplete bill for the private company purchases is only slightly less than the $2.3bn that IBM disclosed it is spending on Unica and Netezza.