IBM buys GSA shares

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IBM will acquire the remainder of IBM Global Services Australia (GSA) from joint venture partners Telstra and Lend Lease for a combined total of $313.5 million, the companies announced today.

IBM will pay Lend Lease $160 million in two equal tranches for its share of the business and Telstra's shares will be bought for $153.5 million, according to a joint statement from the companies.

Big Blue currently owns 54.4 per cent of IBM GSA, while Telstra and Lend Lease own 22.6 per cent and 23 per cent respectively.

The purchase, which is subject to review by the Foreign Investment Review Board, is slated to be finalised by early September.

The change of ownership reflected "changing business priorities of the three companies," the statement said.

"We have made it clear for some time that our investment in IBM GSA was non-core and, so it's appropriate that we are exiting the joint venture," Lend Lease chief executive Greg Clarke said in the statement.

For Telstra, the sell out takes place as the company is believed to be planning cost cutting and restructuring in its technology division.

Telstra's chief financial officer David Moffatt, said the sale is "a key part of the transformation of Telstra's IT processes which focus on aligning the interests of key vendors with Telstra's vision which is to improve its internal IT skills base".

Brendon Riley, general manager of IBM Australia's Global Services organisation, said that attaining full ownership would allow IBM to "simplify our internal structure and processes".

Big Blue intends to integrate its two consulting organisations--BCS and BIS--making the combined IBM Business Consulting Services possibly the largest business consulting practice in Australia, Riley said.

According to analyst firm International Data Corporation (IDC), IBM Global Services is the leading provider of IT services in the Australian market, with an estimated 15 per cent share.

Riley said: "IBM's increased investment in the Australian IT and consulting services business will allow us to improve our ability to respond rapidly to changes in the marketplace and anticipate the emerging needs of our customersz".

An IBM spokesperson elaborated on Riley's statement, adding this buyout reflects IBM's continued commitment to the consulting market.

The spokesperson was unable to disclose the exact amount it had invested in consulting, but said that IBM has poured half a billion dollars into its revving up its local operations in the past year.

“If you look at the last 12 months, we acquired PwC Consulting and rolled it into IBM Business Consulting Services. This should indicate our strong expression of confidence in the local market and in IBM's local operations and services business,” he told iTNews.

The spokesperson added the integration of BCS and BIS would “not have significant impact on staff numbers”.

The buyout from its joint venture partners would also afford IBM a greater flexibility in terms of the markets IBM chooses to invest in.

IBM GSA will continue to operate as part of IBM's Global Services organisation when the transaction is complete.

IBM and Lend Lease originally formed the joint venture, then called Integrated Systems and Services Corporation (ISSC) in 1994. It was renamed when Telstra became a partner in 1997.


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