What's the attraction of Fortinet? It's growing quickly and offers products to both small businesses and large phone carriers that keep networks secure. Since going public a year ago, Fortinet's profit almost doubled to $14 million in the third quarter, and its sales rose 29% to $85 million. Fortinet had a market value of $2.14 billion, according to Bloomberg. It's stock is currently trading around $36, up sharply by nearly 20% in morning trading today.
IBM has spent $20 billion on 100 acquisitions since CEO Sam Palmisano took over in 2002, according to Bloomberg, and the company plans another $20 billion more by 2015, "adding tools to deliver cloud-computing services via the Internet, as well as software that helps customers analyze data."
What About Oracle-EMC?
The reasons for IBM's move are along the lines I wrote about in September. My view is that IBM, Oracle (ORCL), Cisco Systems (CSCO), Hewlett-Packard (HPQ), Dell (DELL) and Microsoft (MSFT) are among the big tech companies likely to use their huge cash balances and access to extremely low-rate debt to vacuum up smaller firms that are growing more rapidly than they are.
Of the possible acquisition targets that I listed in September, Check Point Software Technologies (CHKP) looks like the next one to be bought. It's a leader in network security systems, had $1.1 billion in sales in the last year and made a profit of $425 million. Its market capitalization is $8.9 billion, and my guess is that its board would agree to sell it for a 25% premium -- at about $54 a share.
Even though Check Point's stock is up 26% in the last three months, it may not be too late to buy it.