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Cash-rich IBM eyes federal business with its 7th deal of 2022

Acquisition is IBM's seventh this calendar year

IBM has agreed to buy Octo, an emerging technology and IT modernisation provider to US federal government agencies, for an undisclosed sum. Octo will join IBM Consulting's US public and federal market organisation.

The IBM acquisition is its seventh this calendar year. It has also bought sustainability performance management firm Envizi, telco consulting firm Sentaca, Azure specialist Neudesic, attack surface management startup Randori, data observability company Databand, and digital product engineering firm Dialexa.

Octo, which employs 1500 staff, is the owner of “oLabs”, the largest privately-owned R&D facility in the DC area dedicated to the federal government; a facility into which it has packed 15 petaflops of AI compute and three petabytes of FlashBlade storage – as well as a 1,000 square feet Autonomous Systems development room.

Octo was founded in 2006. It is owned by Arlington Capital and has itself made four acquisitions since the private equity firm bought it in early 2019. It specialises in defense, intelligence and healthcare.

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Mehul Sanghani, CEO of Octo, said: “We have created an organization focused on digital transformation with modernization missions at scale ranging from public healthcare, to national security, to intelligence and defense. Octo’s combination with IBM affords our clients… the unique opportunity to expand and accelerate that vision – with the global reach of one of the world’s pre-eminent brands and largest technology firms.”

John Granger, SVP, IBM Consulting, said on LinkedIn: “Octo’s highly-skilled consultants and technologists bring expertise helping federal agencies achieve transformation… along with deep experience working with our strategic partners including AWS, Microsoft and Salesforce. The acquisition creates one of the largest digital transformation partners to the federal government with unmatched hybrid cloud and AI expertise.”

The deal is expected to close by the end of the year, subject to customary approvals.

It comes a year after IBM completed the spinoff of its managed infrastructure services business Kyndryl. It also follows a successful quarter for Big Blue, which in October 2022 reported $14.1 billion in revenue, up 15%.

IBM expects to generate an impressive $10 billion in free cash flow this year.

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