Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, June 6, 1995 TAG: 9506060139
SECTION: BUSINESS PAGE: B6 EDITION: METRO
SOURCE: |The New York Times|
DATELINE: LENGTH: Medium
IBM said it will pay $60 a share for Lotus in a tender offer to begin today, following five months of unsuccessful talks. Lotus said it was not in merger talks with IBM but was assessing the offer.
The acquisition, the largest proposed in the software industry, would give IBM several popular software programs that run on its operating systems, including Lotus Notes and Lotus 1-2-3 spreadsheet. Lotus, the third-biggest PC software maker, has been the leading developer of applications for IBM's new OS/2 operating system.
If IBM succeeds in acquiring Lotus, the world's largest computer manufacturer would be in position to challenge Microsoft as the biggest maker of personal computer software. Microsoft in the last few years has taken market share from Cambridge, Mass.-based Lotus, which lost money in the first quarter on declining sales of its word processors and spreadsheet.
``Basically, they declared war on Microsoft,'' said analyst David Wu, of S.G. Warburg & Co. ``They will be a bigger competitor to Microsoft.''
IBM Chairman Louis Gerstner said the company wants Lotus for its ``very strong position on the desktop.'' The computer software industry is headed toward the ``marriage of the strength of the desktop ... with large-scale systems,'' Gerstner said. ``I don't think [Microsoft is] anywhere as far along as a combined Lotus-IBM team.''
Lotus' stock almost doubled, which analysts attributed to expectations of a bidding war by IBM, Oracle Corp., Novell Inc. and possibly AT&T Corp.
Lotus' common stock trading on the Nasdaq stock marked jumped $28.9375, closing at $61.4375 a share, which was more than IBM's offer. It was the most active issue on U.S. exchanges, and the almost 29.78 million shares traded made for the 10th biggest trading day for an individual Nasdaq stock. IBM's stock fell on the New York Stock Exchange by $2.625, closing Monday at $91.25 a share.
IBM said the $60-a-share offer is a ``fair price'' and it has no plans to raise it. The company also said it doesn't see any antitrust issues that would impede the proposed purchase. It plans to pay for Lotus with part of its $10 billion in cash on hand at the end of the first quarter.
IBM said in a letter to Lotus Chief Executive Jim Manzi that a tender offer is the fastest, most efficient way to bring the companies together, as Lotus has ``been unwilling to proceed.''
``By no means is it a sure thing that IBM will acquire Lotus,'' said Rob Enderle, an analyst at market research firm Dataquest Inc.
Oracle or Novell might consider buying Lotus because their products are tailored toward a computer network, where IBM's OS/2 is directed at desktop computers, he said.
``The value of the software company is the programming staff,'' Enderle said. ``If I was over there and I was looking at being bought by IBM, then I probably have my resume out. IBM will probably end up buying a shell.''
The acquisition gives credibility to IBM's strategy in the market for desktop software, analysts said, because it will add several popular applications to IBM's OS/2 operating system. The system is not yet a serious threat to Microsoft's Windows, analysts said.
OS/2 has sold 9 million copies, with 2 million of the newest version, Warp, sold since its introduction in the fall of 1994. Microsoft has sold 65 million copies of its Windows operating system.
``It is purely a defensive move on the part of IBM,'' said Peter Rogers, analyst at Bear Stearns & Co. ``There are few attractive applications that run on OS/2, and Notes has been disproportionately responsible for the success of OS/2 in networks.''
by CNB