IBM Acquires Sequent Computer Systems for $810m in Cash

Strategic Insights -

International Business Machines (IBM) has made a significant move in the computer server market by acquiring Sequent Computer Systems, a manufacturer of supercomputers, for approximately $810m in cash. The acquisition, which strengthens IBM's position in the market for computer servers, fills a gap in its product line between lower-performance Intel-based servers and high-end servers based on IBM's own PowerPC microprocessors. The combined effort aims to create a new standard version of the Unix operating system, with the new system expected to be ready for delivery by the middle of next year.

Key Takeaways:

  • IBM acquired Sequent Computer Systems for approximately $810m in cash, paying $18 a share, a small premium over the stock's closing price of $17.75 on Friday.
  • The acquisition strengthens IBM's position in the market for computer servers, filling a gap in its product line between lower-performance Intel-based servers and high-end servers based on IBM's own PowerPC microprocessors.
  • Sequent's computer architecture and software are significant elements of the combination, enabling large numbers of microprocessors to work together as a single computer system.
  • The company's current products incorporate up to 64 Intel chips, and a 256-processor version is in development, typically used to manage large databases.
  • IBM will sell Sequent's computers worldwide and adapt the multi-processor architecture for use in other IBM server products.
  • Sequent's founder and chief executive, Casey Powell, stated that as part of IBM, Sequent would achieve the market reach it lacked as an independent company and is "looking forward to doing significant damage" to competitors.
  • Sequent's revenues declined 6% to $784.2m last year, and analysts have been projecting revenues of about $840m this year.

Statistics:

  • $810m: the approximate value of the transaction
  • $18: the price per share of Sequent Computer Systems
  • $17.75: the closing price of Sequent's stock on Friday
  • 6%: the decline in Sequent's revenues last year
  • $784.2m: Sequent's revenues for last year
  • $840m: analysts' projected revenues for Sequent this year
  • 64: the number of Intel chips in Sequent's current products
  • 256: the number of processors in a planned version of Sequent's systems