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By Martin LaMonica and Dawn Kawamoto
Staff Writer, CNET News.com
August 23, 2006
IBM made a resounding move into security on Wednesday, acquiring
Internet Security Systems for $1.3 billion.
The all-cash transaction of about $28 per share is meant to bolster
IBM's ability to deliver security services to corporations, the
ISS builds network protection products and services, including
intrusion detection and monitoring tools.
IBM said it intends to use ISS's expertise and software to provide
more robust security-related services to its corporate customers.
"We see security services as an area of huge growth potential...and
that's why we're putting (ISS) in the services side of our operation,"
said Val Rahmani, general manager of infrastructure management
services at IBM Global Services.
She noted that ISS, which will remain a separate business unit within
IBM's global services organization, will work closely with Big Blue's
software and server divisions.
IBM already offers some managed security services and includes
security software in its Tivoli product line.
"Tivoli, in particular, will work (in) lockstep with ISS, as new
products are developed," Rahmani said.
With the ISS acquisition, IBM is hoping to grab a larger share of the
estimated $22 billion security services market, she added.
The two companies, which have been partners since 1999, realized over
the course of time that they were headed in the same direction of
offering security as a service and service-oriented architecture
The acquisition, expected to close in fourth quarter of this year,
adds to a rapid-fire succession of big purchases at IBM. In August
alone, IBM has announced plans to buy Webify Solutions, MRO Software
and FileNet. The tab, if all the deals go through, will exceed $3.6
Looking to boost revenue from software and services, most of the
company's acquisitions--which total more than 40 since 2003--have been
IBM is seeking to grow profits by creating a comprehensive product
portfolio and deliver a combination of software and consulting
services, company executives have said.
A number of analysts applauded the merger of IBM and ISS.
"In addition to improving IBM's security portfolio...this acquisition
furthers IBM's (security as a service) initiatives," Allan Krans, an
analyst at Technology Business Research, wrote in a research note.
"With the purchase of ISS, IBM will gain enhanced capabilities to
deliver security as a service for its customers. The focus moves away
from delivering software-product solutions for security, and towards
delivering a complete mix of software, services and hardware to
address customers' specific security requirements."
With ISS, Big Blue intends to deliver the company's products through
consulting engagements and hosted services.
"By delivering an integrated security platform that is adaptable and
extensible to address new threats and business requirements without
incremental complexity and cost, ISS has delivered the foundation for
delivering security as a service," said Tom Noonan, CEO of ISS.
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