IBM to acquire Kenexa, an HR software company in Wayne

Rudy Karsan , Kenexa cofounder, foresees net employment growth here.
Rudy Karsan , Kenexa cofounder, foresees net employment growth here.
Posted: August 29, 2012

Following an industry trend, tech giant IBM announced that it would acquire Kenexa Corp., the Wayne-based human-resources software company, for $1.3 billion or $46 a share.

On Friday, Kenexa shares closed at $32.39.

IBM's willingness to pay a premium for the shares shows its eagerness to tap into the human-resource and talent-management software segment, one of the fastest growing segments of software used by businesses for their operations.

This year, Oracle and SAP also bought human-resource software companies, both of them Kenexa competitors.

The wrinkle here is that IBM sees Kenexa as a perfect canvas for the stake it is making in "social business," such as applying Facebook and Twitter networking concepts to business operations.

No wonder Nooruddin "Rudy" Karsan, who co-founded the company in 1987, was paying such close attention to Twitter traffic on the news.

"From 9 to 10:30 a.m. there were more tweets about this transaction than there were about the hurricane," Karsan said gleefully. "That's the IBM megaphone, and Kenexa will be a part of it."

Kenexa shares closed at $45.79 Monday on the news, while IBM shares dropped 1.05 percent to close at $195.69. The deal is expected to close in December.

Kenexa, said Scott Berg, a senior research analyst at Northland Capital Markets, of Minneapolis, was just beginning to develop "social business" capabilities.

But its strong suit - software to manage recruiting, hiring, orientation, compensation, employee engagement, training, even exit procedures - makes it a perfect property for IBM's ambitions in the social-business arena.

Kenexa's business practice of combining its software with consulting and human-resource research fits in with IBM's model, Berg said.

Of all the software being devised for companies to use to operate all phases of their business, from finance to production, human-resource software is growing the fastest, Berg said, making that niche a good place for IBM to place its bets.

"The acquisition provides an enclave into HR software solutions, which has healthy demand trends. IBM can use Kenexa to increase its touch points with different business leaders within an organization," wrote analysts Joseph D. Foresi and Jeffrey Rossetti with Janney Capital Markets.

Strategy aside, Kenexa "has a very blue-chip customer list that's very impressive," Alistair Rennie, general manager of IBM's social business, said in a press call.

Kenexa's client list numbers 8,900, the company said, and includes Starbucks, Boeing, Verizon, GE, and the U.S. Navy.

What the deal means for Kenexa's 239 employees in Wayne is uncertain. Both Rennie and Karsan dodged that specific question, although Karsan later opined that the deal would lead to net employment growth in the Philadelphia area.

As of December, Kenexa had 2,744 employees, up from 1,963 in December 2010. Its workforce is global, with more than 400 stationed in India. Others are based in Argentina, Poland, and China. Because of earlier mergers and acquisitions, the company has a major employment base in Lincoln, Neb.

The company has had a net loss for four years. Revenues, though, have expanded over the last three years, to $282.9 million, up from $196.4 million in 2010 and $157.7 million in 2009.


Kenexa Corp.

Headquarters: Wayne

Business: Human- resource software and consulting, specializing in recruitment and talent management.

2011 Revenues: $282.9 million, 73.5 percent from the United States.

2011 Net loss: $7.3 million.

 Employees: 2,744 with 239 in Wayne.

Chairman and CEO: Nooruddin "Rudy" Karsan.  

The deal: IBM to buy Kenexa for $1.3 billion, or $46 a share.

Share price (KNXA): $45.79 at Monday's close, up from Friday's close of $32.39;

Share price (IBM): $195.69 at Monday's close, down from Friday's close of $197.77.

SOURCE: Kenexa annual report


Contact Jane M. Von Bergen at jvonbergen@phillynews.com, @JaneVonBergen on Twitter, or at 215-854-2769. Read her workplace blog at www.philly.com/jobbing.

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