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4/11/2010
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Bob Evans
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Global CIO: If IBM Needs Big Growth, Who's On Acquisition List?

Both of those questions carry significant repercussions for CIOs about IBM's focus, ability to execute, and possibly shorter list of competitors.

Some institutional investors and financial analysts are claiming that IBM CEO Sam Palmisano, after restoring the company's financial health and transforming its core strategy and operations, has not paid enough attention to significant growth opportunities. They claim that while Palmisano has made plenty of small and mid-sized acquisitions, mostly in business analytics and predictive analytics, Oracle and HP have strengthened their positions against IBM by making large-scale acquisitions.

Other analysts, however, are more bullish on IBM's growth prospects and argue that while Palmisano's numerous analytics acquisitions did not immediately boost IBM's top line significantly, those new software tools are now giving IBM the potential for significant longer-term growth as they've been woven into IBM's broader set of services and technology offerings, exemplified by its Smarter Planet initiative.

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For CIOs, the answers to those questions are of profound interest for a few reasons:

1) IBM has done a terrific job of integrating and optimizing not only its hardware and software products but also its extensive and unmatched set of consulting and technology services. If IBM decides to pursue more-aggressive growth via acquisitions, will the resulting purchase and integration efforts dilute IBM's carefully crafted focus on tying together products and services with an emphasis on delivering foresight into the future via predictive analytics?

2) Strategy and technology roadmaps have begun to settle down a bit following some large and highly transformative deals in the past couple of years: HP buying EDS, Dell buying Perot, Xerox buying ACS, and Oracle buying Sun, and also Cisco jumping with both feet into servers and storage. If IBM decides to do one or two large or even mid-size deals, will primary competitors such as HP and Oracle feel compelled to respond in kind by pursuing similar deals (even though they'd never admit publicly to that rationale)?

3) CIOs have long had love/hate relationships with the "one-stop shop" ideal: they love the idea that some of their core technology partners have vast and complementary products and services, but simultaneously those CIOs hate the idea of becoming even close to overly dependent on any one tech partner. If IBM decides to buy its way into some new markets or extend its reach in some of its existing sectors, that will intensify its one-stop status. And if a domino effect sees HP or Oracle of Dell or Cisco making similar moves, CIOs could well find them selves with significantly fewer large-scale IT companies from which to choose. While not an impossible situation or without any benefits, that type of reduced-competition scenario is certainly one that CIOs would not be eager to see come about.

In such a scenario, which companies might IBM look to buy? We've got about 10 prospects listed at the bottom of this column, just before our "Recommended Reading" list.

Clanging the alarm on the need for IBM to grow was a recent article in Businessweek that leveraged the financial reporting of its new corporate parent, Bloomberg, to survey some big institutional holders of IBM stock on their view of the company's prospects. Here are some of the comments from that Businessweek piece:

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