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IBM, Kingdee to seal global software tie

(Reuters)
Updated: 2007-06-04 16:52

IBM and Lehman Brothers have agreed to pay nearly US$17 million for 7.7 percent of Kingdee International Software Group Ltd., aiming to establish an alliance under which Big Blue will help the Chinese software firm re-design its products and expand globally.

Kingdee -- which sells software to help businesses run more efficiently -- said on Monday the partners would begin cooperating on sales within China initially, before expanding that distribution tie-up internationally.

IBM -- which will get 3.85 percent of Kingdee by paying nearly half what its shares were last traded at -- intends to help the Chinese firm by "re-engineering" its products to better suit a global market, according to a statement.

The U.S. firm will also gain access to Kingdee's domestic sales channels.

The deal "will raise the company's profile in the industry and in the professional investor community," Kingdee said.

IBM and Lehman have agreed to pay HK$132 million (US$16.9 million), or HK$3.7885 per share.

China's nascent software market is projected to gallop ahead by about 10 percent annually and account for almost a quarter of Asian IT spending of $48.37 billion by 2010, excluding Japan, according to IT consultancy IDC, as corporations and government offices overhaul operations.

But the country now hosts hundreds of homegrown software companies, most of them small and unheard-of outside local markets.

SAP'schief operating officertold Reuters last year he believed a Chinese software maker could emerge in coming years as a more serious threat than even Oracle.

Kingdee, which SAP regards as its closest competitor within the world's fourth-largest economy, hopes to ride persistent growth at home while making forays into Southeast Asia and other overseas markets such as India or the Middle East.

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It hopes to expand revenue 30 percent a year till 2010 and post at least a quarter of sales from abroad by then, versus about 5 percent now, executives have told Reuters.

Shenzhen-based Kingdee expects to nearly double overseas revenue annually over the next four years. To get there, it plans to start small in markets such as Singapore, Malaysia and Indonesia -- now fragmented and housing no single dominant player -- before marketing its services in more mature arenas of Australia, South Korea and Japan.