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October 30, 2010, 12:02 AM EDT
By Serena Saitto and Peter Burrows
Oct. 30 (Bloomberg) -- Fortinet Inc., a maker of network- security systems, got a takeover approach from International Business Machines Corp., said two people close to the situation.
The discussions with IBM may be at an advanced stage, according to one of the people, who asked not to be identified because the talks haven’t been made public. Fortinet is working with Morgan Stanley on its strategic options, the people said.
Fortinet, with a market value of $2.14 billion, focuses on all-in-one systems that keep networks secure, and it caters to companies ranging from small businesses to large phone carriers. IBM Chief Executive Officer Sam Palmisano has said he plans to spend about $20 billion on acquisitions in the next five years, adding tools to deliver cloud-computing services via the Internet, as well as software that helps customers analyze data.
“IBM’s move is part of a bigger trend where technology companies are trying to fill the gaps in their portfolios,” said Rajesh Ghai, an analyst at ThinkEquity LLC in San Francisco. “Fortinet is growing very fast, and IBM is looking at high-growth companies also because the return on cash on a balance sheet is very low.”
IBM, the world’s largest provider of computer services, approached Fortinet six to eight weeks ago, according to one of the people. A deal could still come unraveled.
Ed Barbini, a spokesman for IBM, declined to comment, as did Rick Popko, a spokesman for Fortinet, and Morgan Stanley spokeswoman Mary Claire Delaney.
Stock Surge
Fortinet, based in Sunnyvale, California, went public a year ago and its shares have gained 71 percent this year amid speculation that it might become an acquisition target. It climbed as much as $2.42, or 8.1 percent, to $32.42 in extended trading yesterday. The shares had been unchanged at $30 on the Nasdaq Stock Market. IBM, based in Armonk, New York, added $2.70, or 1.9 percent, to $143.60 in New York Stock Exchange composite trading.
Fortinet almost doubled net income to $14 million in the third quarter from $7.89 million a year earlier, as sales jumped 29 percent to $85 million. The company raised $156.3 million in its November initial public offering, the first by a Silicon Valley startup in almost two years. Its shares were priced at $12.50 apiece.
IBM and other companies, including Hewlett-Packard Co., Oracle Corp. and Intel Corp., are using takeovers to add technology that can help them cater to corporate customers building data centers to handle a Web-traffic boom.
IBM has spent more than $20 billion on 100 purchases since Palmisano took over in 2002, as he shifts IBM’s focus to software and services from hardware. His largest takeover was business-management software maker Cognos Inc., for $5 billion.
To build up its data-center technology, HP agreed to spend $2.35 billion in September for the money-losing storage maker 3Par Inc., after an 18-day bidding war with Dell Inc. more than tripled 3Par’s share price.
--With assistance from Katie Hoffmann in New York. Editors: Tom Giles, Nick Turner.
To contact the reporters on this story: Serena Saitto in New York at ssaitto@bloomberg.net; Peter Burrows in San Francisco at pburrows@bloomberg.net.
To contact the editor responsible for this story: Tom Giles at tgiles@bloomberg.net; Jennifer Sondag at jsondag@bloomberg.net.
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Oct. 30 (Bloomberg) -- Fortinet Inc., a maker of network- security systems, got a takeover approach from International Business Machines Corp., said two people close to the situation.
The discussions with IBM may be at an advanced stage, according to one of the people, who asked not to be identified because the talks haven’t been made public. Fortinet is working with Morgan Stanley on its strategic options, the people said.
Fortinet, with a market value of $2.14 billion, focuses on all-in-one systems that keep networks secure, and it caters to companies ranging from small businesses to large phone carriers. IBM Chief Executive Officer Sam Palmisano has said he plans to spend about $20 billion on acquisitions in the next five years, adding tools to deliver cloud-computing services via the Internet, as well as software that helps customers analyze data.
“IBM’s move is part of a bigger trend where technology companies are trying to fill the gaps in their portfolios,” said Rajesh Ghai, an analyst at ThinkEquity LLC in San Francisco. “Fortinet is growing very fast, and IBM is looking at high-growth companies also because the return on cash on a balance sheet is very low.”
IBM, the world’s largest provider of computer services, approached Fortinet six to eight weeks ago, according to one of the people. A deal could still come unraveled.
Ed Barbini, a spokesman for IBM, declined to comment, as did Rick Popko, a spokesman for Fortinet, and Morgan Stanley spokeswoman Mary Claire Delaney.
Stock Surge
Fortinet, based in Sunnyvale, California, went public a year ago and its shares have gained 71 percent this year amid speculation that it might become an acquisition target. It climbed as much as $2.42, or 8.1 percent, to $32.42 in extended trading yesterday. The shares had been unchanged at $30 on the Nasdaq Stock Market. IBM, based in Armonk, New York, added $2.70, or 1.9 percent, to $143.60 in New York Stock Exchange composite trading.
Fortinet almost doubled net income to $14 million in the third quarter from $7.89 million a year earlier, as sales jumped 29 percent to $85 million. The company raised $156.3 million in its November initial public offering, the first by a Silicon Valley startup in almost two years. Its shares were priced at $12.50 apiece.
IBM and other companies, including Hewlett-Packard Co., Oracle Corp. and Intel Corp., are using takeovers to add technology that can help them cater to corporate customers building data centers to handle a Web-traffic boom.
IBM has spent more than $20 billion on 100 purchases since Palmisano took over in 2002, as he shifts IBM’s focus to software and services from hardware. His largest takeover was business-management software maker Cognos Inc., for $5 billion.
To build up its data-center technology, HP agreed to spend $2.35 billion in September for the money-losing storage maker 3Par Inc., after an 18-day bidding war with Dell Inc. more than tripled 3Par’s share price.
--With assistance from Katie Hoffmann in New York. Editors: Tom Giles, Nick Turner.
To contact the reporters on this story: Serena Saitto in New York at ssaitto@bloomberg.net; Peter Burrows in San Francisco at pburrows@bloomberg.net.
To contact the editor responsible for this story: Tom Giles at tgiles@bloomberg.net; Jennifer Sondag at jsondag@bloomberg.net.
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