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IBM Gets Comfy With Security

While there was no disclosure of the price tag, IBM's (NYSE: IBM  ) acquisition of Watchfire last week is certainly important. The deal not only boosts Big Blue's development tools unit, but also its security business.

Founded more than a decade ago, Watchfire has made several key acquisitions and has picked up more than $40 million in venture capital along the way. Now the company has a comprehensive system that allows customers to add security features while developing software applications. Its customers include Dell (Nasdaq: DELL  ) , AXA Financial (NYSE: AXA  ) , and Vodafone (NYSE: VOD  ) .

"Watchfire has great technology," said Nick Selby, a security analyst at the 451 Group, in a Fool interview. "It helps deal with security problems early in the process. This is a big help and critical for Corporate America. Why should security be something done after an application is built?"

Watchfire is also a nice fit with IBM's Rational development tools segment. It should be an effective cross-sale for existing customers and may even persuade new customers to come over to IBM. With a bulk of Watchfire's sales from the U.S., there should be lots of potential in foreign markets.

Keep in mind that Watchfire has not only been a partner with Rational but also IBM's global services segment. This should help smooth the integration process.

Watchfire's market has been mostly a niche. But with the validation from IBM, this is likely to change. It will also mean that Big Blue can give even more reasons for customers to buy its growing line of software offerings.

Further Foolishness:

Dell and Vodafone are Motley Fool Inside Value picks. Take a 30-day free trial.

Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. He is currently ranked 2,149 out of 29,896 in CAPS.

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