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IBM acquires Kenexa Corp. for $1.3b

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IBM Corporate Headquarters

IBM Corporate Headquarters

International Business Machines Corp. plans to acquire Kenexa Corp., human resources management company, for roughly $1.3 billion in cash. The latest IBM corp. acquisition shows that the company continues to strengthen its online software applications set.

The acquisition of Kenexa

Kenexa is a fast-growing company, although it is still unprofitable. However Kenexa is believed to be one of leading suppliers of human resources software and consulting services. Kenexa, the Pennsylvania-based company, has more than 8900 customers to recruit, retain and develop their workforce. In addition it employs roughly 2800 workers.  Kenexa’s HR software is designed to help companies recruit and manage their employees with software tools similar to popular social media portals such as Facebook and LinkedIn. The acquisition of Kenexa is a big asset to IBM.

IBM Corp. has informed that it plans to continue to support all Kenexa’s clients who will be given also an access to IBM Corp’s offerings at the same time.

IBM Corp. had not been interested in the applications business; instead it preferred to focus on infrastructure software such as databases and Web servers. But in the last few years IBM Corp’s officials decided to change the way of the company’s expansion. Since then IBM Corp. has become more engaged in business application market mainly by acquisitions. Those purchases put IBM Corp. into competitions with some its applications partners, inter alia, SAP AG.

IBM Corp.’s officials are convinced that the acquisition of Kenexa will allow the company to draw upon its products and expertise to create social networking tools for corporate consumers searching for ways of better communications among their workers.

IBM Corp. has paid a steep premium for Kenexa. Kenexa’s shares were up 41 percent to $45.81 in recent trading, which was just below IBM’s offer of a $46 per a single share.

Steve A. Mills, senior vice president and group executive at IBM Corp., is convinced that the acquisition of Kenexa will help company’s clients to get and maintain more connected work labor using social media tools and other technology. He said: "It's about building expertise networks." The deal is expected to be closed in the fourth quarter.

Increasing competition among software makers

The acquisition of Kenexa is one of the latest signs of increasing competition among software makers, which are using mergers, purchases to transform their companies and  adjust to new clients’ requirements and demands.

Certainly the latest acquisition of Kenexa makes IBM Corp. more competitive with Oracle Corp., the database producer, and SAP AG.  Both Oracle and SAP AG have been recently in the process of buying so-called “cloud computing” companies. The technology of "cloud computing" allows businesses to run software remotely.  So far Oracle has bought three social software services, including the purchase of HR software maker Taleo Corp. for about $1.9 billion net of its cash and debt. Microsoft Corp. wants to pay $1.2 billion for Yammer. Inc. has bought Buddy Media for approximately $689 million.  But even Dell and Hewlett-Packard, computer makers, have been buying “cloud computing” companies.

Peter Goldmacher, an analyst with Cowen & Company, strongly believes that those acquisitions are signs of an aggressive competition among these companies. He said: "All of these enterprise technology players are coming after each other."

IBM Corp. plans to spend approximately $20 billion on acquisition from 2011 to 2015. Most of planned purchases have come in software as IBM Corp. attempts to be more present in the high-margin business market.

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