HCL Takes Over IBM’s 7 Software Products For $1.8 Billion; Investors Not Happy, Share Prices Crash

HCL will now get 5000 new customers, because of this mega software deal. But is it worth it?

HCL has acquired IBM's 7 Software products
HCL has acquired IBM’s 7 Software products

In a unique partnership of ideas and innovations, Indian IT behemoth HCL has acquired IBM’s 7 crucial software products.

This comes months after IBM acquired Redhat for $34 billion, which was hailed as the biggest software deals ever.

HCL has paid $1.8 billion to acquire these 7 IBM software products.

However, it seems that the investors and shareholders aren’t happy. Share prices tumbled by 7%, as soon as the news broke out.

Why did HCL acquire these software products? And why are the investors not happy?

This Is Why HCL Acquired IBM’s 7 Software Products

This is infact a transaction of intellectual property rights, which is picking up steam in the IT industry.

These 7 products are related to security and commerce domains and IBM decided to sell them off to HCL so that they can be better utilized.

As per reports, these 7 software suits have a collective market of $50 billion, which is still untapped, and HCL hopes to crack it.

Giving an estimate of the ROI, C Vijayakumar, President & CEO, HCL Technologies said, “The products that we are acquiring are in large growing market areas like Security, Marketing and Commerce which are strategic segments for HCL. We expect $650 million revenue on an annual run rate basis from the second year of the deal.”

It is estimated that HCL will be now connecting and collaborating with 5000 new customers, as a result of this acquisition.

Which Are These 7 Software Products?

The 7 software products from IBM which are being acquired by HCL are:

  • AppScan: This is used for a secured application development environment
  • BigFix: This is used for creating a secured device management environment
  • Unica (on-premise): This is labeled as a cutting-edge marketing automation product
  • Commerce (on-premise): This will provide an omni-channel eCommerce suite
  • Portal (on-premise): Digital Experience of consumers can be mapped with this
  • Notes & Domino: This software are for managing and optimizing emails and low-code rapid application development
  • Connections: This is for Workstream collaboration

IBM and HCL had already inked a 5-year deal to use these software and products suite. But now, the software has been acquired by HCL.

But Investors Aren’t Happy; Share Prices Dip

As soon as the news broke out, share prices of HCL tumbled, and they experienced their steepest fall since May, 2018.

In the sensitive MSCI Asia Pacific Index, HCL shares were one of the worst performing stocks, and the value dropped by 7.7% in Mumbai.

Analysts are saying that HCL, which borrowed $300 million to fund this deal, should have waited: This is a too big a pie for HCL to bite and digest.

On the other hand, representatives from HCL are stating that it would have taken 10 years to acquire these 5000 new customers.

We will keep you updated as we receive more inputs on this mega software deal.

If you are from HCL or IBM, then do share your comments and feedback right here!

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