Cisco and Satyam Deals, IBM Wheels

 

Cisco Systems Inc. announced its intention to acquire Tidal Software Inc., a provider of intelligent application management and automation solutions while Tech Mahindra Ltd. is purchasing a controlling stake in Satyam Computer Services Ltd. In other news, the IBM Corp. acquisition offer for Sun Microsystems Inc. was rejected by Sun's board of directors.

Focal Points:

• Cisco made another move to enhance its unified computing data center strategy by seeking to acquire privately held Tidal Software, a company based in Palo Alto, CA and Houston, TX. The deal is valued at $105 million, which is a combination of cash for investors and retention incentives. The Tidal Software organization will become part of Cisco's Advanced Services group. The deal is expected to close before the end of July.
• Tech Mahindra, which is 31 percent owned by Britain's BT Group, edged out Larsen and Toubro Ltd. (which currently owns 12 percent of Satyam) in the bid to purchase up to 51 percent of Satyam. The company will pay more than $500 million for the controlling stake. Initially, Tech Mahindra will pay $351 million for a 31 percent preferential allotment of new shares, and then make an open offer for a further 20 percent of the company at a cost of up to around $225 million. Tech Mahindra earns 75 percent of its revenues from Europe and has a strong IT business in telecommunications, whereas Satyam derives 70 percent of its revenues in North America and is weak in the Telecom sector. Satyam's fraud scandals had driven the valuation of the company down to $660 million and were impacting its ability to retain clients and employees. The company claims it still has approximately 50,000 employees and strong revenues.
• A spilt in the Sun board killed the IBM acquisition. While neither party will publicly acknowledge that the merger talks occurred, the word is that co-founder and Chairman Scott McNealy led a group of directors that objected to the purchase price, while CEO Jonathan Schwartz defended the deal. Sun also wanted assurances that IBM would remain committed to the deal, even if it ran into serious objections from government antitrust authorities, according to sources. Experton Group feels Sun is now exposed and needs a buyer to survive long-term. The most likely potential buyers right now are Cisco and Oracle Corp. – neither of which is a natural fit.

Experton Group believes the leading firms in the IT sector are evolving their strategies so as to balance their offerings to withstand the economic turmoil across regions and industry sectors and strengthen their positions as the IT markets transform. Cisco's acquisition is designed to improve its unified computing strategy while Tech Mahindra leaps into a top 10, balanced outsourcing slot in India. IBM, with or without Sun, is executing its vision of what a full service IT provider must deliver to satisfy enterprise requirements inside and outside of the traditional IT arena. IT executives should develop and implement plans to convert their corporate and line of business strategies into agile, better optimized processes and solutions that will enable their companies to endure the current market dislocations and grow unconstrained by IT infrastructure. In so doing, IT executives should work with their strategic partners to map and integrate corporate architectures, roadmaps, and strategies with those of their key providers.