It was announced last week that IBM will sell Lotus Notes/Domino to Indian tech firm, HCL for $1.8 billion in an all-cash deal.
IBM Sells Notes, Domino, Portal, and Five Other Properties to HCL
While Lotus Notes, Domino, and Portal were once all central to IBM’s business, in recent years IBM has used these properties less-and-less as it has migrated into other areas of concentration. The deal, which marks the largest single acquisition by an India-based IT service firm to date, will include all of these entities, as well as five others. Lotus Notes was acquired by IBM for $3.5 billion in 1995.
A Smart Play for HCL
According to reports, HCL plans to use $1.475 billion of its own cash and to borrow the other $300 million in order to finance the deal. The deal itself includes 8 software products and marks the further initiative for HCL to sell proprietary products and services in the same manner IBM has. In remarks by HCL president and CEO C Vijayakumar he states, “The large-scale deployments of these products provide us with a great opportunity to reach and serve thousands of global enterprises across a wide range of industries and markets.”
A Win-Win Deal
The deal makes sense for both parties. HCL will put to use software which will allow it to move into new areas of expansion which it asserts could generate as much as $625 million over the next 12-months, and IBM will be paid to unload a technology it is no longer adequately using.
A Smart Play for IBM
The deal comes just weeks after IBM paid $34 billion for Red Hat. It has been speculated the move to sell Lotus is a means to mitigate some of that cost. As for HCL, the acquisition may take a little time to fully integrate. According to Vijayakumar, “It’s a mix of products, some of them are cash cows and some of them will keep growing. Some of the products will need some infusion of fresh life to allow them to grow faster.”
The deal is expected to close sometime in 2019.