Today's headlines that IBM (NYSE: IBM) is looking at beefing up its security offerings raises the question if management would acquire Israel-based Check Point Software (NASDAQ: CHKP). Val Rahmani, IBM's general manager of infrastructure management for global technology services, sees security as a key to growth. Val said, "We're looking at a lot of different companies right now, as we always do in a number of different spaces within security."

Until now, the thought on the Street was that Check Point was going to continue as a stand-alone company, but with IBM on the prowl, it may be too much for CEO Gil Schwed to resist. Check Point currently trades at a market cap of $5.53 billion, and an acquisition would certainly come with a much higher price tag. Based on valuation, it would take between $7-8 billion to buy the company. For deep-pocketed IBM, that's not too high a price. For Schwed, a takeover at that price would be tough to reject, and it would break all records for M&A of an Israeli company.

Based on IBM's track record, I would doubt that it is going to try to grow its own security business organically; rather, it will most probably purchase a serious player. Stay tuned to see if that player will be Check Point.

Disclosure: Writer holds a position in CHKP. He has no other position in any stock mentioned as of 11/2/07.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com.

Will IBM check out Check Point? originally appeared on BloggingStocks on Fri, 02 Nov 2007 14:35:00 EST. Please see our terms for use of feeds.