Investment Strategies for Large Companies, Research Paper Example

Large companies make strategic investments by investing in other smaller companies with an aim of growing such companies to attain large profits in the future. The goal is not more on profit, but supporting the company to establish a name in the market. Strategic investment is an activity for established companies with a large market share to assist the small, struggling companies to survive in the market. The investment is with an aim of boosting the bigger company’s future market because when such an organization grows up it will become a client of the big company. Some companies in the United States have taken momentous steps in strategic investments examples are IBM and Cisco. This paper seeks to research on the current strategic acquisition of these two companies.

The latest collection of IBM is the Varicent software incorporated on April 2012. This is a private company with its headquarter in Toronto Canada, and the company offers software solutions for enhancement of performance and management (Nalbone & Davis 21). The acquisition will assist IBM to place analytic abilities on its employees in order to transform operations of businesses. The acquisition aims to remove the work clogs in spreadsheets and emails to enhance growth opportunities for businesses. IBM aims at marketing the sales performance and management tool to industries in the world to increase profitability of the business. The sales automaton will increase competitiveness of industries in the world because it will make accurate and intelligence management of data. The software is expected to reduce more than 90 percent errors and 40 percent time reduction (Nalbone and Davis). The new acquired Varicent software will support banks, retailers, insurances, and telecommunication clients of IBM thus will increase their profits. The software increases speed and reduces tedious work performed by other analyzers.

Varicent Software Inc. was founded in the year 2003; it has around 180 customers enjoying the benefits of the software, which include Starwood Hotels, Farmers, Dex One, Hertz among others. The company makes a strategic fit with its resources and capital. The workers of Varicent will join the highly qualified workers of IBM in developed of the software into a global hit (IBM Press Releases 31). Varicent joins other IBM acquisitions such as Algorithms, SPSS, and Cognos in expansion of the IBM analytics market.

Since IBM is a leading global provider of analytic solution, it will increase its market by providing the solution to clients like fraud detection, customer services, and financial operations. The acquisition is set to close by June 2012, and all Varicent employees with an expectation to become official IBM employees in the IBM software group (Nalbone and Davis 12). Over the years, Varicent Software Incorporated is ranked top five for two consecutive years in the status of the greatest rising corporations in Canada. This acquisition is set to maximize the profit margin of IBM and increase their customer satisfaction both locally and globally.

The second acquisition of IBM recently is Worklight, (IBM news for Jan 2012) to enhance IBM mobile advances. This is an Israeli- based provider of mobile phones and its software. This acquisition is set to span IBM’s mobile application development, security, and management. This acquisition was motivated by the fact that IBM wants to take advantage of the new android software, that is, the market and enhance development of new mobile software to get some profits from the market. The two companies make a strategic fit in both resources and opportunities; the Worklight provides the expertise and training to IBM staff that will enhance productivity of IBM staff. The Worklight will provide IBM with an opportunity to broaden its network and satisfy its customers. The buy-out makes sense since it leads to development of IBM’s industry and enhance customer satisfaction to their clients (IBM Press Releases, 20). Worklight had clear guidelines for its clients, and it has emerged as an IT solution to many industries.

The third latest IBM acquisition is the Green hat as seen in the IBM press release on 4 January 2012. This is a leader in software testing and quality checking for servers and other cloud environment. This company acquisition was motivated by the need for IBM to provide software testing for its customers in the cloud to help them minimize cost and increase in quality. The structures of the transaction were based on the agreement between the green hat and IBM. The acquisition will enhance IBM’s business driving skills and improve the quality of software produced. This will change the management style of software development in terms of cost, testing, and the risk involved.

Green Hat will utilize IBM rational solution to enhance efficiency and effectiveness of software production in the market. Green Hat has a customer base globally of over 2000 and makes testing automation of complex system used by less time and cost (IBM Press Releases 23). IBM intends to upgrade its levels of software production from this acquisition. Green hat will benefit from the vast marketing opportunities from the enormous market of IBM clients. The acquisition only targets to enhance the quality of IBM services.

Cúram Software Ltd is another IBM acquisitions reported on 20 December 2011. The company is expected to enhance the abilities of IBM in helping cities and government services to the citizens. This will be possible through the assessing the needs, executing social programs, and maximizing the results. The company’s software is used globally to deliver efficient social services by health, workforce, and social security organizations (IBM Press Releases 17).

The software reduces the costs of the programs and directs the services in key issues that make people the center of the program. The companies made a strategic fit because it broadens the role of IBM in Ireland, in various sectors of the economy. The software acquisition is estimated to assist the government to grow its income by more than 18%, from $34 billion to $57 billion per year in 2014. More than 700 Cúram Software Ltd employees are expected to join IBM and be part of the workforce that will boost growth and profitability of the company (Nalbone and Davis 25).

Cisco according to their press release is worldwide networking leader that is transforming connection, communication, and collaboration of people in the globe. It has acquired a number of companies and solution over the last six months. Some of them include ClearAccess, NDS Group Ltd, BNI, and Versely video among many others. ClearAccess acquisition intent was announced on 28^th march 2012 (Jenkins-bloom, Villazon, & Benjamin, 11). This is a private company is at Vancouver in Washington providing TR-069-based software for the provision and management of communication device for the service providers. The acquisition is meant to take advantage of these services offered by this company. The name of the hardware section of the company will continue as SmartRG, Inc. Cisco. The software and management capabilities of ClearAccess will improve the Cisco portfolio in service provision (Jenkins-bloom, Villazon and Benjamin 45). The workforce of ClearAccess will enhance quality software development for CISCO.

The other recent Cisco acquisition is the NDS Group Ltd, which a leader in video software production and content security provision (Brandy & Bergamo-Tacy, March 15, 2012). Cisco will expand its abilities to bring a change to the style of media and video provision in the world. NDS is expected to supplement the video services for Cisco and broaden its market opportunities in emerging markets like China and India, a big market for this new acquisition. Cisco will pay about $5 billion with all its debts included to acquire the businesses and operations of the company.

Another acquisition of Cisco is BNI video, which was announced in November 14, 2011 in the Cisco Network Press Release. This acquisition will enhance the Cisco TV platform and enhance delivery of services across any devices on the Internet. This will reduce the operational cost of for Cisco clients and customers and provide profit growth for the company. Cisco will also provide a wider market for the services offered by BNI since Cisco has a wide network of customers. The cost of buying BNI and all its assets will be $99 Million including all its businesses and ventures. The employees of BNI video will become part of the large group of the large (Jenkins-bloom, Villazon and Benjamin 23).

Versly is also one of the recent acquisitions of Cisco as announced by Cisco press in August 29, 2011. Versly has a plug-in that is integrated in Microsoft Office programs; this simplifies work in these applications by increasing efficiency and effectiveness. Versly is collaboration software that will become part of Cisco group to enhance customer experience for Cisco. This acquisition comes to meet one of Cisco’s top five priorities, which is collaboration (Brandy & Bergamo-Tacy 22). Versly will enjoy the enormous clientele of Cisco that ranges to about 600 million users. Cisco will benefit from the strong talents and technology that will build a high quality collaboration network. The company purchase included all its assets and business, but its value was undisclosed.

IBM strategic investment in general is aimed at improving the image and the brand name of IBM. It is also about improving the quality of services of the company and reduces the cost of production and profitability of the customers. This will go hand in hand, in increasing the profits of IBM and its growth capabilities. The acquisition will also improve international business for IBM since it includes getting its clients and the skilled workers. The investments are also based on the priorities of the company like acquisition of Versly by Cisco. The priorities and goals of a company are part of the issues considered in the acquisition of the company.

Cisco acquisition includes software companies that will enhance its productivity and grow its profits. The acquisitions are part of the needs to meet their capacity to satisfy clients. They also help to get qualified staff and market necessary to make profits and growth increment (IBM Press Releases, 2012).

Works Cited

Brandy, Jim and Erin Bergamo-Tacy. Cisco Announces Intent to Acquire NDS. San Jose: Press Release:, March 15, 2012.

IBM Press Releases. News room. 2012. 24 April 2012 <http://www-03.ibm.com/press/us/en/index.wss?lnk=ftai>.

Jenkins-bloom, Robyn, Carol Villazon and Culp Benjamin. Cisco Announces Intent to Acquire ClearAccess. California: Press Release: Cisco Systems, Inc., March 28, 2012.

Nalbone, Kristine A. and Lia P. Davis. IBM Acquires Varicent Software. Toronto: IBM Media Relations, 2012. Print