Eye on M&A

IBM stirs acquisition buzz

IBM stirs acquisition buzz

The handful of acquisitions in past weeks has been largely overshadowed by a possible acquisition of Sun Microsystems Inc. by IBM Corp.

The Wall Street Journal reported that IBM is likely to pay about $6.5 billion in cash for Sun. The New York Times calls it nearly $7 billion, and Dow Jones Online ramps it up to $8 billion.

IBM’s strategy, according to the pundits, is to expand its position in powering big data centers before the anticipated consolidation in the server market hits and unify the Solaris operating system and Java programming language supporters in a potential Windows-killing drive — at least on higher end servers.

However, plenty of other suspects and motives are in this melodrama. Dell Inc. is seeing the possible merger as an enormous opportunity, with the ensuing uncertainty surrounding Sun servers driving enterprise customers to Dell, Reuters said.

Dow Jones suggests a shootout among Hewlett-Packard Co., IBM and Cisco Systems Inc. might be coming. Cisco entered the data server market with its acquisition of Nuova Systems Inc.

Rumors of a sale or restructuring of Sun began growing louder last fall when Sun co-founder Andy von Bechtolsheim resigned to focus, along with co-founder David Cheriton, on start-up Arista Networks Inc. The company has built a cloud computing 10 Gigabit Ethernet network switch that is smaller and, at $500 per port, 90 percent cheaper than similar Cisco products. One early customer is Lawrence Livermore National Laboratory.

Google Inc. joins the cast of characters as the possible originator of the Arista technology. A Nyquist Capital analyst in 2007 deconstructed Google’s performance and deduced that the company had built a new 10 Gigabit Ehternet switch, and that the Arista switch was a remarkable match for it. Bechtolsheim was an early investor in Google.

Bechtolsheim and Cheriton, known as men with a golden touch, figure prominently in this story. In 1996, they sold one of their start-ups, Granite Systems Inc., to Cisco, which turned the gigabit technology into profits. In 2004, they sold another start-up, server-maker Kealia, to Sun. Other key players in the troupe include Jayshree Ullal, a former Cisco executive, now chief executive officer at Arista, and ex-Sun executive Eric Schmidt, now CEO of Google.

The answer to the question of whether IBM will bid on Sun might be just the beginning of this convoluted tale.

BearingPoint saga coming to a close

BearingPoint Inc.’s plan to emerge from bankruptcy relies on selling most of its assets, including the bulk of its U.S. government work to Deloitte.

The two companies signed an agreement for a $350 million asset purchase. Commercial parts of BearingPoint are going to PricewaterhosueCoopers LLP for $25 million. Deals are being negotiated for BearingPoint businesses in Japan, Latin America and Europe to local managers in those areas.

The break-up will bring an end to BearingPoint’s troubled life, which began in 2001 when it split from KPMG LLP. In recent years, it has been weighed down by $1 billion in debt before its bankruptcy filing, and it faced an April 15 deadline to repay $200 million in loans.

Aronson brokers deals

Working on actual mergers in the government information technology market, Aronson Capital Partners brokered a pair of deals in recent weeks.

Aronson advised ManTech International Corp. in its acquisition of DDK Technology Group Inc., a provider of cybersecurity services to the Defense Department with a particular focus on the Naval Criminal Investigative Service.

Terms of the deal were not disclosed, but DDK, of Lanham, Md., will likely add about $14 million to ManTech’s 2009 revenue, ManTech officials said.

DDK provides services that include cyber intelligence analysis, computer and network forensics, and counterterrorism and counterintelligence support and analysis. All of DDK’s employees have high-level security clearances, the officials said.

Aronson also helped engineering services firm Parsons Corp. with its acquisition of McMunn Associates Inc. MAI provides analytical, technical, training and management services to U.S. intelligence agencies.

Terms of the deal were not disclosed. Herndon, Va.-based MAI has about 100 employees. The company will become a subsidiary of Parsons Infrastructure and Technology Group.

About the Author

Sami Lais is a special contributor to Washington Technology.

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