IBM is like a weather vane; it points the way the wind is blowing, at least in information management. For that reason, its financial results are important. Q4 results released late last night, showing an increase of revenues by 2% to US$ 29.5 billion, are no exception, especially when its CFO Mark Loughbirdge indicated that 2012 looks like it will produce a Big Blue buying spree, just like 2010.
That’s probably no real surprise, given that it has already closed three deals since the beginning of the year alone, but the fact that it has got bags and bags of money left to spend will be good or bad news depending on whether you want your company taken over.
Leaving aside the figures for a moment, Loughbridge also explained why 2011 was such quiet year on the acquisitions front.
In the webcast around the Q4 results, he explained that, by IBM's recooking, the price of companies had gotten a little bit too rich for IBM and that it eased off a little bit, waiting for the inevitable return to reason (do we need at this point need to remind anyone of the ridiculous price paid for Autonomy by HP?).
In 2010, I thought prices were pretty reasonable. We had a lot of good candidates. We did 17 acquisitions, as I'll remind you. Things got a little frothier as we went into 2011. We did pull back, but we still had some very strong acquisitions. You've seen in the fourth quarter we had about four acquisitions,” he said.
In terms of how extensive this year’s buying spree might be, he had this to say:
I still think the best guide over the longer period ... we had said that in the 2015 timeframe that we saw about $20 billion of acquisition spend. In that specific calendar timeframe, we've only done about $1.8 billion. I still think the $20 billion is a realistic number;”
In other words that between now and 2015, IBM has still around US$ 18 billion to spend in a market where prices are reasonable.
It will not be involved in multi-billion dollar deals, a fact that its new CEO Virginia Rometty has said on previous occasions.
And there seems little reason to do that. IBM buys what it needs to fill holes, not companies to start entire new lines of business, and we’ll all be seeing more of this year.
If you’ve ever wondered then, how IBM finally makes its decision as to whether it should buy, Loughbridge also had some words on that.
IBM uses its own analytics tools. It’s always a good sign when you see chefs eating in their own restaurants, and so it is with IBM’s analytics. It is so sure that its analytics software produces the right information that it uses itself in assessing acquisitions.
…We use that analytical tool to improve our performance. So when you do an acquisition, you've got to put that team on the ground. We now know the five or six key elements that we have to actually -- absolutely nail to perform against that, and we can hit those very, very quickly,” Loughbridge said.
Which probably explains why analytics and other IBM software performed so well in the last quarter.
Overall, Q4 revenues rose 2% to US$ 29.5 billion with revenues from the high-growth BRIC countries -- Brazil, Russia, India and China -- increasing 10%. These markets now account for 22% of IBM business.
Again, using software as an indicator of the general health of the IT market, things are looking good as software revenues led the way for IBM, rising by 9% to US$ 7.6 billion.
Revenues from its middleware products, which include WebSphere, Information Management, Tivoli, Lotus and Rational, were US$ 5.2 billion, an increase of 11% vs. the fourth quarter of 2010, while operating systems revenues of US$ 710 million increased 3% compared with the prior-year quarter.
Revenues from the WebSphere family of software products increased 21% year over year. Information Management software revenues increased 9%. Revenues from Tivoli software increased 14%. Revenues from Lotus software decreased 2% and Rational software increased 4%, IBM said.
Nice figures, if you can get them, but also indicative of an interesting year head for Big Blue.