Slashdot Mirror
IBM Getting PwC Consulting for $3.5 Billion
MoThugz writes: "This Yahoo! News article reports that IBM will be buying PriceWaterhouseCoopers Consulting for a cool $3.5 billion in cash and stock. From the page: 'The purchase is aimed at boosting slowing revenues in the computer giant's large services business, which now accounts for more revenue than its well-known computers and mainframes. ... The merger gives IBM, the world's largest supplier of computers and computer services, the consulting arm of PriceWaterhouseCoopers, the world's largest accounting firm. The combined IBM-PriceWaterhouseCoopers will rank a close second to top consultant Accenture Ltd. , formerly Andersen Consulting.'"
Jesus, Andersen changed their name already? What, do they have a small army of business card printers and sign-repainters standing by in case of corporate scandal?
...quality promotion liaison."
"Hey, aren't you from Ande-"
"Hmm? Nope! Nope, never heard of them! I'm from *checks card* uhh, Accenture, and I am a *checks card*
The opinions stated herein do not necessarily represent those of anybody at all. Deal with it.
These figures are off the top of my head, please correct me if wrong.
Consulting made up ~25% of IBM's 18 Billion in revenue last year. It's been a significant part of IBM for a long time and many credit the consulting arm of IBM for pulling IBM through the '90s. IBM is *much* more than a harddrive manufacturer or computer hardware company.
If you have a hard time understanding this, put it this way... IBM was the Microsoft of the 60s, 70s, and 80s. Back then, Computers were mostly for *accounting* and various services that you would hire consultants for. IBM took advantage of this and became big. I question Microsoft, because after ~10 years as a substantial Monopoly, they haven't successfully branched into another area and their largest competition is given away for free.
Anyways, I figured a consulting explanation was in order for anybody who wants to post a *WHY WOULD IBM BUY A CONSULTING FIRM?* comment.
BTW, does anybody know what happened to the name "Monday"? I thought PWC consulting was changing it's name to "Monday". Am I wrong?
Bringing irony to the Slash-masses
and this post gets modded down as redundant:
Accenture was originally part of the Arthur Andersen LLC conglomerate, as Andersen Consulting. Notice the consulting, not accounting. In January 2001 they renamed themselves to Accenture and began public trade.
That all doesn't mean that it's off the hook, however.
I have dealt with PWC's "consulting" before and IBM just paid a lot of money for a really crappy business and a gaggle of STUPID people.
Out of the six or so PWC-run projects I've been involved with at various places of work, every single one has been:
a) a massive failure
b) over budget
c) not at all what the customer wanted in the first place
d) way over on scheduled time
Natural != (nontoxic || beneficial)
They picked it up really cheap, so its probably a good thing in the long run. The stock will be down, at least tomorrow morning, because the earnings per share will go down in the short run.
Gerstner did a pretty good job changing IBM from an old mainframe company in a PC world to a profitable service company. He, like almost all good CEOs, used aggressive accounting. In IBM's case it was the assumptions on their pension, and some income from what is known in street parlance as one time items (sales of assets or businesses, and some of their licensing agreements with up front payments). It happened that an enterprising reporter from the NYT scooped the street on figuring out how much of their earnings in 2001 were a result of this shortly after Enron filed for bankruptcy. When the story broke IBM's credibility dropped rapidly, and their lower earnings this year didn't improve the new guy's reputation much either. They aren't broken and will continue to be a very dominant force in technology, but that doesn't mean that has little to do with the current stock price movements.
From my quite limited experience with consultants I would guess that your quote refers to the employees of consulting firms, the firms themselves mint money. Thats what created one of the biggest problems with accountants.
Degaussing scares the bad magnetism out of the monitor and fills it with good karma.
This acquisition makes perfect sense. Just as corporate security requires much more than just securing the computers, offering business solutions requires more than just offering hardware and software. When IBM's clients are faced with a business problem, IBM can now offer not only hardware and software, but solutions for the tax angle, the public relations angle, etc. My guess is that they've been looking to do something like this for a while, and now there's a 60% off sale going on at the NYSE.
Good! Tech mergers mean I get fewer rejection notices!
Table-ized A.I.
IBM just bought Monday ... Stay tuned as they make a move to pick up the rest of the week.
So PWC had to sell off their consulting unit to somebody, or spin it off as a standalone entity. IBM makes sense as a buyer, since they already do IT consulting and related services. IBM probably got a good price, since this was a forced sale.
No big thing; it actually makes sense as a deal.
Q: What do you get if you cross IBM and PWC?
A: IBM
(Yes, it's not funny; it wasn't funny when they bought the company I worked for, either...)
-- Terry
As merger season is apparently upon us, here's some other possible additions to the merger club:
Hale Business Systems, Mary Kay Cosmetics, Fuller Brush, and W.R. Grace Company merge to become Hale Mary Fuller Grace.
Polygram Records, Warner Brothers, and Keebler Crackers merge to become Polly-Warner-Cracker.
3M and Goodyear merge to become MMMGood.
John Deere and Abitibi-Price merge to become Deere Abi.
Zippo Manufacturing, Audi Motors, Dofasco, and Dakota Mining merge to become Zip Audi Do Da.
Honeywell, Imasco, and Home Oil merge to become Honey I'm Home.
Denison Mines, and Alliance and Metal Mining merge to become Mine All Mine.
Xerox and Wurlitzer will merge and begin manufacturing reproductive organs.
Fairchild Electronics and Honeywell Computers will merge and become Fairwell Honeychild.
3M, J.C. Penney and the Canadian Opera Company will merge and become 3 Penney Opera.
Knott's Berry Farm & National Organization of Women will merge and become Knott NOW!
<!-- DHTML / JavaScript menu, popup tooltip, Ajax scripts -->
I once talked to a very high level consultant working for one of the big consultancy firms, at a bar. He told me this,
"Look at there business and come up with the most complicated solution, and describe it in the most vague and unintelligible way you can. Make sure to use lots of big technical words,especially trendy ones, feel free to make up entirely new terminology to desribe everyday things. For instance a gateway is now a "Inter/Intra network liason device", and a router is now a "packet traffic management switching and delegation processing unit." Do not spell out clearly how to implement your plan. If the business does well, take all the credit. If not, claim they did not implement your plan correctly, and that it is their own fault for leaving out the most "critical" piece of your solution."
That was from a guy I knew in Philly who made 7 figures a year, and that he employed the strategy on all consultant gigs from management, to manufacturing and IT.
Could Jesus microwave a burrito so hot, that he himself could not eat it? HS
Back in the day (before it was known as PwC) I worked for PW. Because they were a part of a accounting company, they were constrained by the accounting rules. This meant that even though we computer types were not accountants, we still needed to comply with the investment rules and the continuing education rules. We watched Andersen form AC, then morph that to Accenture, and wondered what was stopping PW from doing the same thing.
:)
I've seen some postings about idiots, wasted money, and pet technologies being implemented by these firms. I worked with some of the smartest people I've ever met while I was at PW. I also watched some big dopes try to make things work.
Some folks did squander client's money. Other clients demanded that we build something that pleased the CIO of their company, even if they were told that it would never solve the problem that they wanted it to solve.
I did participate in some great projects - projects that helped companies and government agencies solve some really big problems.
PW's strength (from my perspective) was that they could bring smart people to the table who could figure out how to solve problems while not being held back by company politics or excessive meetings.
Now, as a member of a large corporation, I see that there are many projects that we are simply unable to tackle because we don't have enough team players, or enough aggressive and smart players to move the ball. That's when we call the big folks like IBM and Accenture.....
I guess my pension $$ are now a part of IBM's program.
But Herr Heisenberg, how does the electron know when I'm looking?
Right. I worked for one of these orgs too, and since the accountants had more votes in the partnership and held the managing partner positions, they called all the shots. The consultants just got to complain about it and threaten to go elsewhere. Remember Accenture's multi-year fight to get out from under the thumb of AA? It was only resolved through *big* payments from Accenture to AA, and then only after bitter arbitration.
From Accenture's IPO prospectus:
"Until August 7, 2000, we had contractual relationships with Andersen Worldwide and Arthur Andersen under certain agreements whereby we and our "member firms," which are now our subsidiaries, on the one hand, and Arthur Andersen and its member firms, on the other hand, were two stand-alone business units linked through various member firm agreements to Andersen Worldwide, a single coordinating entity. On December 17, 1997, the Accenture member firms requested binding arbitration of claims that Andersen Worldwide and the member firms of Arthur Andersen, among other things, had breached or failed to perform material obligations owed to the Accenture member firms under the member firm agreements.
"On August 7, 2000, the parties to the arbitration were notified that the tribunal appointed by the International Chamber of Commerce in its final award, dated July 28, 2000, had ruled that Andersen Worldwide had breached its material obligations under the member firm agreements and that the Accenture member firms were excused from any further obligations to Andersen Worldwide and Arthur Andersen as of August 7, 2000. Under the terms of the final award, Accenture, and each of the member firms comprising it, was required to cease using the Andersen name or any derivative thereof, no later than December 31, 2000. On January 1, 2001, we began to conduct business under the name Accenture.
"On December 19, 2000, Andersen Worldwide and Arthur Andersen LLP, on behalf of themselves and all other Arthur Andersen member firms, partners, shareholders and others, and Accenture Partners, S.C. and Accenture LLP, on behalf of themselves and all other Accenture member firms, partners, shareholders and others, executed a binding memorandum of understanding agreement to settle and resolve all existing and potential disputes among the parties concerning the implementation of the final award and the separation of the Accenture member firms from Andersen Worldwide and Arthur Andersen, including the discharge and release of all obligations of parties under the terminated member firm agreements between the Accenture member firms and Andersen Worldwide. The memorandum of understanding agreement provided for the parties to enter into a number of definitive agreements with respect to services, subleases, releases and indemnities and to finalize other arrangements among the parties. It also contained provisions for specified uses by Accenture of its former name. On March 1, 2001, Accenture, Andersen Worldwide and Arthur Andersen completed implementation of the memorandum of understanding agreement by executing releases and indemnities, finalizing other arrangements among the parties and entering into services agreements..."
Milo