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IBM Should Buy Cloudera For $5 Billion

Jun. 15, 2020 7:30 AM ETCloudera, Inc. (CLDR), IBM64 Comments
Richard Saintvilus profile picture
Richard Saintvilus


  • From a complementary and growth standpoint, Cloudera fits all the criteria IBM should be looking for in an M&A candidate.
  • Cloudera can provide IBM — which now owns Red Hat — an immediate leadership position in the Hadoop/Spark ecosystem.
  • With $12 billion in cash and marketable short-term investments and long-term marketable securities, IBM can buy Cloudera four times.

When a company with tons of cash, yet short on growth wants to enter new markets, M&A is usually the quickest route to gaining access, and in some cases, market share in industries that would otherwise take years to build. And that seems be the strategy that International Business Machines (NYSE:IBM) has adopted in recent years — albeit unsuccessfully. But now could be an ideal time to buy IBM shares.

The company, affectionately known as “Big Blue,” is now under a new regime, which, in my opinion, has an opportunity finally fix the company’s growth deficiency. I think one of the major steps would be to acquire Cloudera (NYSE:CLDR), which has a strong portfolio of enterprises services for private, hybrid and public cloud platforms - many of which include databases, data processing, AI and machine learning tools.

Buying Cloudera would immediately change IBM's growth trajectory, turning the once-prominent company into precisely what it has marketed itself as - an intelligence think tank. Why now? Shares of Cloudera - a data analytics platform - have been under heavy selling pressure recently, falling as much at 22% in the past three trading days, driven by a combination of factors. Aside from delivering mixed first-quarter earnings results, the management also issued downbeat second-quarter and full-year guidance.

But the main the reason for Cloudera's recent decline could also be what investors believe to be lack of any real suitor. I say “real” because Bloomberg reported that the company has explored a sale “after receiving interest.” According to the report, Cloudera has consulted financial advisors to “evaluate its options.” Without any real substance to the claim, the CLDR stock has pulled back after spiking some 19% Tuesday. Investors have seemingly taken the “fool me once” approach towards the rumors.

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This article was written by

Richard Saintvilus profile picture
After 20 successful years in the IT industry, Richard Saintvilus decided his second act would be as a stock analyst - bringing logic from an investor's point of view. His goal is to remove the complicated aspect of investing and present it to readers in a way that makes sense. Richard's work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in CLDR over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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