HCL Tech to acquire seven IBM software assets for $1.8 billion; all you need to know

By: | Updated: December 7, 2018 2:02 PM

HCL is buying IBM's seven businesses focused on markets such as e-commerce and human resources, and represent a total addressable market of more than $50 billion.

HCL Technologies, Prateek Aggarwal, HCL Technologies CFO, HCL Tech, Hindustan Unilever, Shiv NadarThe deal is part of IBM’s efforts to focus more on cloud computing. (Reuters)

HCL Technologies, India’s third-largest information technology services company, has agreed to acquire some software assets from IBM for $1.8 billion, in one of the biggest acquisitions by an Indian IT firm. As part of the deal, HCL is buying IBM’s seven businesses focused on markets such human resources and as e-commerce, the company said in a statement, adding that software products it is buying represent a total addressable market of more than $50 billion.

The products include Unica (on-premise) for marketing automation, Appscan for secure application development, BigFix for secure device management, Commerce (on-premise) for omnichannel eCommerce, Portal (on-premise) for digital experience, Connections for workstream collaboration, and Notes & Domino for email and low-code rapid application development. The transaction is expected to be completed by mid-2019.

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On the other hand, the ongoing licensing pact between the two firms will continue for five of these products. The deal is part of IBM’s efforts to focus more on cloud computing.

“Over the last four years, we have been prioritizing our investments to develop integrated capabilities in areas such as AI for business, hybrid cloud, cybersecurity, analytics, supply chain and blockchain as well as industry-specific platforms and solutions including healthcare, industrial IOT, and financial services. These are among the emerging, high-value segments of the IT industry,” said John Kelly, IBM senior vice president, Cognitive Solutions and Research.

It may be noted that IBM is in the process to strengthen its presence in the hybrid cloud market, which combines software and services delivered over the public internet with similar offerings run on companies’ own servers and data centres. In October this year, IBM agreed to acquire Red Hat Inc., a specialist in this area, for a whopping $34 billion.

READ MORE: Biggest tech acquisition of 2018: All you need to know about IBM’s $34-billion buyout of Red Hat

“The products that we are acquiring are in large growing market areas like Security, Marketing and Commerce which are strategic segments for HCL,” said C Vijayakumar, President & CEO, HCL.

Further, HCL said that it expects an incremental revenue of nearly $650 million on a run-rate basis in the second year after closing this deal. However, the revenue in the first year is expected to be about $25 million lower due to transition. Besides, the EBITDA margin is expected to be about 50% on a run-rate basis.

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