Big Blue Makes Data Integration Play with $1.1 Billion Buy

Targeting a fast-growing company that addresses a growing business concern, IBM (NYSE: IBM) today said it had reached an agreement to buy data integration company Ascential Software in a deal worth about US$1.1 billion.

Big Blue's first major deal since selling off its personal computer division gives it access to a market leader in the data integration field, which aims to help enterprises coordinate vast quantities of information and make business intelligence efforts more effective by harnessing widely scattered data.

IBM will pay $18.50 a share in cash for Ascential, a premium of 18 percent over the company's Friday closing price of $15.70.

Bold Play

With the deal, IBM essentially completes an acquisition it began in 2001, when it paid around $1 billion to buy the Informix database business. After that sale to Big Blue, the company formerly known as Informix changed its name to Ascential and began to focus on data integration.

The move is seen by analysts as a bold play for software that will be an important part of the technology menu that IBM uses to link services and hardware sales to high-end customers.

The deal combines "two hot growth areas and fast-growing businesses," IBM spokesperson Holli Haswell told the E-Commerce Times. IBM's own information integration unit saw triple-digit growth last year while Ascential posted a 46 percent jump in revenue.

Haswell said the buy will leverage IBM's middleware by helping customers to "better integrate, structure and manage information crucial to business initiatives." The combined products will address a range of initiatives, from business intelligence to business performance management, multi-channel commerce, merger and acquisition consolidation and compliance with data-focused regulations.

IBM said the purchase addresses a growing challenge for customers: finding ways to leverage multiple streams of data to perform meaningful analysis. For instance, a single retailer might have data from store sales , catalogs and e-commerce, or another company might have massive stores of data from smaller firms it purchased over time but never fully integrated.

The purchase is seen by IBM and analysts as fitting well into its long-term "on-demand" computing strategy.

Familiarity a Plus

"Information integration is an important enabler of an on-demand business strategy," Steve Mills, senior vice president of the IBM Software Group, said in a statement. The buy, he added, "strengthens our ability to help customers create an environment that delivers the data they need, in the right form, to the right place at the right time."

The acquisition is the largest for IBM since it bought Rational Software in 2003 for $2.1 billion. That purchase also focused on handling databases and making data work for businesses that are eager to understand what the vast quantities of information they've collected about their business, their customers and the marketplace can tell them about how to improve their performance.

Judith Hurwitz, president of consulting firm Hurwitz & Associates, which has worked with Ascential products, told the E-Commerce Times that IBM is familiar with what it's buying, having used Ascential software in many enterprise settings already.

"This whole area of integrating data from lots of different sources in order to do business dynamically is becoming increasingly important to customers," Hurwitz said.

Hurwitz said the purchase will help IBM not only boost software sales but also to position its services unit and its hardware division for more success as customers seek to turn as much work over as possible to a single vendor.

"We've actually talked to a number of Ascential customers and we've heard that message loud and clear," she added. "The problem is that a lot of organizations aren't getting more staff and it really is a lot of work to manage a vendor relationship. If you can do more with one vendor, it saves a lot of time and resources."

Strategic Component

In a conference call, Ascential CEO Peter Gyenes said the acquisition reflects a "shared perspective where we both see data integration as a really strategic component of the technology industry."

Gyenes also said customers prefer to "work with vendors who are able to provide broad product platform and a breadth of solutions across the enterprise."

Reaction to the deal was nearly all positive. Shareholders boosted IBM stock higher in morning trading today to $91.77 per share.

IBM executives said Ascential would maintain its headquarters in Westborough, Massachusetts, about 25 miles from Boston. The deal is expected to close sometime next quarter.