Newspaper article THE JOURNAL RECORD

IBM Launches Hostile Bid for Software Maker Lotus

Newspaper article THE JOURNAL RECORD

IBM Launches Hostile Bid for Software Maker Lotus

Article excerpt

NEW YORK _ IBM displayed its hunger to again lead the high-tech world Monday with a $3.3 billion hostile takeover bid for software maker Lotus Development Corp.

If completed, the deal would reshape the personal computer software industry and put IBM in the best position to challenge Microsoft Corp., which now dominates the array of products used by millions of personal computer users around the world.

Such a deal also would be a key in restoring the industry leadership IBM lost through blunders in the early days of personal computers.

Lotus, a software pioneer that has forfeited much ground to Microsoft over the years, had rejected IBM's buyout suggestions during five months of private talks. But Lotus said Monday it would at least consider the $60 per share cash offer, twice its market value.

The deal would be the largest ever in the software industry. It would also mark the first time that International Business Machines Corp., the world's largest computer company and paragon of blue chip firms, has attempted a hostile takeover.

"Together, our skills match in a way that is breathtaking," Louis V. Gerstner Jr, IBM's chairman and chief executive officer, told a news conference.

For instance, Lotus' strength in desktop computing programs complements IBM's forte with programs for large computers. It has a strong presence with retailers and consumers while IBM's marketing power is directly to business and government.

Lotus makes the leading product, Lotus Notes, in a market known as "groupware" that is now small but becoming more important. Microsoft is about to launch a competing program, called Exchange. Such products allow information spread across large numbers of computers to be easily shared and changed.

In addition, Lotus has become the leading developer of applications, such as word processing and spreadsheet programs, that work with IBM's OS-2 operating software, a rival to Microsoft's Windows.

IBM would pay for the acquisition from its $10 billion cash holdings. There has been speculation for months that the company would make a large acquisition with the money, and Lotus had been considered a likely target.

Several observers were surprised Lotus had resisted IBM's private offers and expect the company to eventually accept.

"I'm a little surprised it's a hostile takeover because both sides are a winner," said Bill Stephenson, national director of information technology consulting for Grant Thornton, a large accounting and consulting firm.

"We were looking for somebody to acquire Lotus to combat Microsoft," he said. "IBM here is going to be a huge help."

Hostile takeovers are rare in the software industry because a company's core asset are programmers, who must be treated kindly by a purchaser. This means financial details are usually negotiated before a deal is announced. …

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