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International Business Machines Corp. said late Wednesday it will acquire government-focused digital transformation services company Octo from private-equity firm Arlington Capital Partners, in a move aimed at sharpening its focus on shepherding the federal government into the digital age.
Neither IBM
IBM,
-0.16%
nor Arlington Capital disclosed terms for the purchase of Reston, Va.-based Octo. Both expect the deal to close before the year is out, and about 1,500 Octo employees will join IBM Consulting’s U.S. public and federal market organization.
In its last quarterly earnings report, IBM Consulting reported a 5.4% gain in revenue to $4.7 billion from a year ago, lagging just behind the company’s total sales gain, at 6.5% to $14.11 billion.
In a statement, IBM said “agencies need an industry partner to help them navigate a scalable path to IT modernization with the power to leverage emerging technologies and applications, optimize costs and operational efficiencies, and improve security.”
“We have created an organization focused on digital transformation with modernization missions at scale ranging from public healthcare, to national security, to intelligence & defense,” said Mehul Sanghani, Octo’s chief executive and founder, in a statement.
IBM said Octo marks IBM Consulting’s eighth acquisition of the year, and the company’s 25th since Arvind Krishna became CEO in April 2020.
IBM shares are a tech outlier with a 10.2% gain on the year, while the Dow Jones Industrial Average
DJIA,
+0.00%,
which counts IBM as a component, is down 7.5%. Meanwhile, the S&P 500 index
SPX,
-0.19%
has fallen 17.5%, and the tech-heavy Nasdaq Composite Index
COMP,
-0.51%
has dropped 30%.
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