IBM buys software firm for $1.7bn

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The Australian, Edition 1 - All-round Country
WED 26 MAY 2010, Page 039

IBM buys software firm for $1.7bn


By: SPENCER ANTE Source: The Wall Street Journal


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IN a move aimed at beefing up its e-commerce software business, IBM has agreed to purchase software maker Sterling Commerce from AT&T for $US1.4 billion ($1.7bn).
The deal underscores a more aggressive effort by IBM to expand its business through a string of software acquisitions. Sterling, based in Dublin, Ohio, would be IBM's biggest software acquisition since 2008, when it acquired Cognos for $US4.9bn.
At the height of the dotcom boom, AT&T predecessor SBC Communications bought Sterling Commerce for $US3.9bn. An AT&T spokeswoman said Sterling was no longer central to its long-term strategy.
IBM already has a strong business in linking software programs and processes within large and small companies. Software from Sterling, which has about 2500 employees and 18,000 customers, would complement those capabilities by helping to connect companies with external partners such as suppliers and customers.
``Sterling has a very nice fit,'' said Steven A. Mills, head of IBM Software Group.
Mr Mills said the deal, expected to close in the second half of 2010, would add to IBM's earnings within a year or two.
Mr Mills said current customers of Sterling and IBM, such as Sony, could benefit from the deal by better linking their website software with the software that manages their supply chains. That way, Sony could more closely align customer demand with its product inventory, he said.
Executives from IBM and Sterling said IBM could expand its software to new industries, such as healthcare and government, as well as into new geographies.
This deal could help Sterling ``reach Japan, China and Eastern Europe more effectively'', said Sterling's chief executive, Bob Irwin.
The deal also gives IBM another weapon in an increasingly fierce battle against software rivals such as SAP and Oracle, which are also beefing up their capabilities.
SAP agreed earlier this month to buy Sybase for about $US5.8bn, entering the market for database software, where IBM maintains a strong position.
Mr Mills said IBM would continue to look for software deals in adjacent markets such as data management, analytics programs and process integration.