HCL to Acquire Select IBM Software Products for $1.8 Billion

HCL buys select IBM's products for $1.8 billion

IBM to sell some of its software products to HCL for US$1.8bn

India's third-largest information technology services company HCL Technologies said on December 7 it will buy some IBM products for $1.8 billion, making it one of the largest acquisitions by an Indian IT firm in recent times. "The products that we are acquiring are in large growing market areas like Security, Marketing and Commerce which are strategic segments for HCL".

IBM will divest seven of its products, including its secure-device management product BigFix, marketing automation software Unica and workstream collaboration product Connections. The companies said in a release that the transaction should close mid-next year, subject to regulatory approvals.

According to Vijayakumar, the large-scale deployments of these products provide the services provider with a great opportunity to reach and serve thousands of global enterprises across a wide range of industries and markets.

A year ago in December, HCL and IBM had entered into an intellectual property partnership worth $850 million to expand revenue streams. Rival TCS, the largest listed company in India, earned 1.23 trillion rupees in revenue a year ago and Infosys recorded revenue of 705.22 billion rupees.

Terms of the deal - unveiled following a weekend of media speculation - will see Big Blue acquire all of the issued and outstanding common shares of Red Hat for US$190.00 per share in cash, in an agreement expected to be finalised in the second half of 2019. Vijayakumar has said earlier that the company is building intellectual property in IT services or engineering services, which have been launched as standalone offerings, strategic IP-led partnerships, and acquisitions.

According to the terms and conditions of the $850-million IP deal, IBM's DevOps and automation divisions would continue to sell the products while HCL would develop them for a 15-year period.

With this acquisition, HCL Tech will get software products in areas of marketing, commerce, security and collaboration, a "highly profitable revenue stream" containing a significant annuity component, and access to over 5,000 large clients across industries and geographic markets, along with sales and marketing teams, the filing said. "As a result, IBM is a leader in these segments today", said John Kelly, IBM senior vice president, Cognitive Solutions and Research.

An IBM spokesperson told TechCircle that the current divestment is not related to their $34-billion acquisition of U.S. software company Red Hat, which it announced recently. On the contrary, IBM has acquired Red Hat in a whopping $34-billion deal to accelerate its efforts towards open-source software and technology.

"We believe. that HCL is well positioned to drive innovation and growth for their customers".

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