International Business Machines Corp. (IBM) is a multinational technology company that offers a range of computing solutions and technology consulting services. Big Blue traces its origins back as early as the 1880s, but it was in 1911 that the company was first incorporated as the Computing-Tabulating-Recording Co. (C-T-R) in the state of New York. C-T-R manufactured and sold a range of machinery, including commercial scales, industrial time recorders, meat and cheese slicers, tabulators, and punched cards. The company formally changed its name to its current name in 1924, and has since grown into a major global corporation focused on software, technology and business consulting, and cloud computing. IBM generated annual net income of $9.4 billion on revenue of $77.1 billion in 2019 and has a market capitalization of $112.2 billion, as of December 15, 2020. It operates through five business segments: Cloud & Cognitive Software, Global Business Services, Global Technology Services, Systems, and Global Financing.
IBM's early history is marked by its focus on the manufacture of machinery and computer hardware products. But beginning around the 1990s the company began to shift its focus toward computer services and software. It sold off hardware businesses, such as flat-panel displays, disk drives, and personal computers, while simultaneously acquiring services and software companies. In recent years, the company has set its sights on becoming a leader in cloud computing, a strategic push underscored by its 2019 acquisition of Red Hat Inc. Below, we take a closer look at five of IBM's more recent acquisitions, all of which have taken place within the past 20 years. The company does not provide a breakdown of how much profit or revenue each acquisition currently contributes, except for quarterly revenue for Red Hat.
Red Hat Inc.
- Type of Business: Open Source Software
- Acquisition Price: approximately $34 billion
- Acquisition Date: July 9, 2019
Red Hat was founded in 1993 by Marc Ewing, or, as he was known by many in the computer lab during college, “the guy in the red hat”. Ewing had created and was distributing his own version of Linux® on CDs. He later joined forces with small businessman Bob Young and the two launched Red Hat Software in 1995, with Young as CEO. The open source development model on which the company was built was aimed at challenging what its founders saw as the monopolistic tendencies of the technology industry. The company went public in 1999 with a record-breaking initial public offering (IPO). In 2019, Red Hat was acquired by IBM for approximately $34 billion, which broke the record for the largest software acquisition in history. The acquisition brings together Red Hat’s open hybrid cloud technologies with the scale and depth of IBM’s innovation, industry expertise, and sales leadership. The goal for IBM has been to work with Red Hat in offering a next-generation hybrid multicloud platform for its enterprise clients, especially as some of IBM’s legacy businesses are shrinking.
- Type of Business: Business Intelligence and Performance Management Software
- Acquisition Price: $4.9 billion
- Acquisition Date: January 31, 2008
Cognos was founded in 1969 by Alan Rushforth and Peter Glenister in Ottawa, Canada. The firm specialized in developing software for business intelligence and performance management. In 2005, Cognos launched its award winning BI 8 product, which could be used for creating professional reports, data analysis and monitoring, model creation, and more. The company was acquired by IBM in 2008 for $4.9 billion. At the time, IBM’s intention in acquiring Cognos was to accelerate its cross-company Information on Demand strategy, unlocking the business value of information through information integration, content and data management, and business consulting services. The combination would help companies increase the value of their information, optimize business processes, and maximize performance.
SoftLayer Technologies Inc.
- Type of Business: Cloud Computing Infrastructure
- Acquisition Price: Financial terms were not disclosed, but was estimated at $2 billion.
- Acquisition Date: July 8, 2013
SoftLayer Technologies was founded in 2005 as a hosting services and cloud computing provider. By the time SoftLayer was acquired by IBM in 2013, it had about 21,000 customers and was operating 13 data centers in the U.S., Europe, and Asia. Following the acquisition, SoftLayer became part of IBM’s cloud services division. The aim of the combination was to create a global cloud platform that would make it easier for companies and organizations to adopt the latest cloud services. It was another example of IBM’s push to accelerate the growth of its cloud computing business since it began making more than a dozen cloud-related acquisitions starting in 2007. SoftLayer, now called IBM Cloud, currently has over 60 data centers in 19 countries.
PricewaterhouseCoopers (PwC) Consulting
- Type of Business: Global Management Consulting and Technology Services
- Acquisition Price: approximately $3.5 billion
- Acquisition Date: October 2, 2002
PricewaterhouseCoopers, a global network of firms offering assurance, tax, and consulting services, was created out of a 1998 merger between Price Waterhouse and Coopers & Lybrand. In 2002, the company sold its consulting services business – PwC Consulting – to IBM for approximately $3.5 billion. IBM integrated the consulting service into a new global business unit called IBM Business Consulting Services, extending the reach of its Global Services Business. At the time, it was the largest consulting services organization in the world, having operations in over 160 countries. The acquisition allowed IBM to combine business consulting with technology solutions, which many of its clients were demanding at the time.
Truven Health Analytics
- Type of Business: Cloud-based Healthcare Data, Analytics, and Insights
- Acquisition Price: $2.6 billion
- Acquisition Date: April 8, 2016
Healthcare data and analytics services company Truven Health Analytics was formerly the healthcare unit of Thomson Reuters Corp. (TRI). Veritas Capital Fund Management LLC bought the healthcare unit from Thomson Reuters for $1.25 billion in 2012 and rebranded it as Truven Health Analytics. Several years later, Truven became a target in IBM’s aggressive push into the healthcare industry. IBM bought the healthcare analytics company in 2016 after making several acquisitions of medical-technology companies totaling more than $4 billion over the previous year. The acquisition provided IBM with a massive new body of data, which will enable IBM to expand the capabilities of its Watson artificial intelligence (AI) system. AI machine learning systems such as Watson require large amounts of data from which they are trained to identify and extract useful patterns. The deal also was expected to double the size of IBM’s healthcare business. Truven has since become fully integrated into IBM Watson Health, which provides solutions to the healthcare industry.