Newspaper article THE JOURNAL RECORD

Wall Street Mulls IBM's Lotus Bid

Newspaper article THE JOURNAL RECORD

Wall Street Mulls IBM's Lotus Bid

Article excerpt

Farrell Kramer

Associated Press

NEW YORK _ Are other suitors lurking? Will IBM increase its offer? Does Lotus plan to fight back? Speculation was rampant Tuesday as IBM's $3.3 billion bid for Lotus Development Corp. hit the street.

IBM's announcement Monday that it was launching a hostile bid for Lotus thundered through Wall Street, pushing Lotus stock above the $60 a share offering price. Lotus shares rose further Tuesday, a reflection of arbitrager reckoning that a sweeter takeover price would emerge.

Arbitragers are professional traders who seek to profit from small differences in stock prices, which often characterize corporate takeovers. They rely on as much information as possible to make their bets.

Many said they believe International Business Machines Corp. will end up paying more than its initial bid for the software company in order to complete the acquisition on friendly terms.

One arbitrager, speaking on condition of anonymity, said some were looking for a final price of $65 a share, with IBM adding $5 a share in stock to its current cash offer.

In the view of securities analysts who follow the computer industry, Lotus represents a unique asset for IBM. For that reason, speculation Tuesday began to move away from the belief that other companies will bid for Lotus.

IBM sees Lotus Notes as a central product to the future of computing. Notes leads a type of software called groupware, which allows information spread across many computers to be easily shared and manipulated.

But Lotus' desktop applications, like its 1-2-3 spreadsheet program, are also valuable to IBM as they can be run on IBM's OS-2 operating system, the software that runs the underlying functions of a computer.

IBM is seeking to promote OS-2 as an alternative to software leader Microsoft Corp.'s Windows, and having a stable of brand-name applications running on it would be an asset.

Companies like AT T Corp. Oracle Systems Corp. and General Motors Corp.'s EDS unit, viewed by some as possible spoilers of the IBM bid, wouldn't value the applications business as highly.

"You can run through the list, but I think they're more unlikely than likely," said Chris Galvin, an analyst at Hambrecht

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