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7/30/2002
03:22 PM
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IBM Buys Monday On Tuesday

IBM says it will pay $3.5 billon in cash and stock for PwC Consulting. Two years ago, Hewlett-Packard tried to buy the consulting firm for around $18 billion.

IBM bulked up its already massive services organization Tuesday when it revealed plans to acquire PwC Consulting, the business-management and technology consulting and services unit of PricewaterhouseCoopers. IBM says it will pay $3.5 billon in cash and stock for PwC Consulting, which expects to post revenue of $4.9 billion in 2002. Two years ago, Hewlett-Packard tried to buy the consulting firm for around $18 billion.

PwC Consulting and its 30,000 employees will be merged into IBM's $35 billion, 150,000-person Global Services unit. Ginni Rometty, general manager of Global Services for the Americas, will head up a new division made up of PwC employees. She'll report to Doug Elix, an IBM senior VP and group executive who heads up the entire IBM Global Services unit. IBM didn't say whether any layoffs would result from the deal.

As a result of the agreement, PwC Consulting has withdrawn its plan for an initial public offering--as well as its plan to rebrand itself with the rather strange name of Monday. The two companies hope to wrap up the deal sometime around the end of September.

IBM executives say they'd looked into buying the consulting firm two years ago but thought it was too expensive at the time. The acquisition will cause earnings per share to drop by almost 30 cents in the fourth quarter. "By 2004, it will contribute to double-digit revenue growth, similar to that of the rest of IBM Global Services," Elix says.

IBM stock closed Tuesday at $71.61, up 61 cents on the New York Stock Exchange.

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