IBM Corp. made some big deals in 2007 trying to remake itself as a software company. The restructuring seems to have paid off as IBM announced Monday morning that its fourth-quarter earnings will be stronger than expected. Investors cheered the positive Big Blue earnings preannouncement, pushing its stock up [IBM]. Meanwhile, IBM's positive sentiment fed the bulls as the overall markets made strong gains in midday trading. The Nasdaq jumped 25.11, or 1.03% to 2,465.05 while the Dow shot up 110.80, or .88% to 12,717.10.
Continue reading below
Big Blue will announce its earnings result on Thursday. The Armonk, N.Y.-based company went on an aggressive M&A tear in 2007 bolstering its software offerings with the following deals that will positively impact its botton line:
- Acquired intelligence software maker Cognos Inc. for $5 billion November 2007
- Purchased Candian data maker integration software maker DataMirror Corp. for $161 million in cash in July 2007
- Bought Sweden's Telelogic AG in a $745 million cash deal in June 2007, its second software acquisition in less than a week
- Sold printer division for $200 million in January 2007
Business software provider SAP AG [SAP] also said it expects to see strong fourth-quarter earnings results. The German company said it expects fourth-quarter revenue will increase 10% to about €3.25 billion ($4.84 billion) from a year ago. Like IBM, SAP was aggressive on the M&A front in 2007, acquiring French peer Business Objects SA for €4.8 billion ($6.8 billion) in October 2007 and making a smaller deal for OutlookSoft Corp. in May 2007 (terms were not disclosed).
The financial sector also has shown some deal chatter over some big names over the last couple of days. Investors are still eyeing Washington Mutual Inc. [WM] and J.P. Morgan Chase & Co. [JPM] as the two have reportedly been in talks over a possible merger. Meanwhile, Merrill Lynch & Co. [MER] is scouring the globe for a capital infusion as analysts speculate it has to write down as much as $10 billion to $15 billion due to its collaterized debt obligations. Merrill was involved in a minor deal Monday as the NYSE Euronext Inc. announced it was acquiring privately held market data software company Wombat Financial Software for $200 million in cash. Merrill is a minority equity stake holder in Wombat. - Gerald Magpily
