International Business Machines (NYSE: IBM) said Monday it plans to acquire AT&T subsidiary Sterling Commerce for $1.4 billion.
IBM�s acquisition of the maker of business-to-business software is part of IBM�s strategic plan to create a one-stop information systems integration solution, which the company announced earlier this month has committed $20 billion to buy companies through 2015 to achieve this end.
Big Blue�s acquisition of Sterling is the largest since 2007, and is a turnabout from six years of retreat from the B2B market. IBM�s software executive Kareem Yusuf explains that �it was a very different marketplace� back then.
Sterling�s technology focuses upon supply chain, logistics, and payments information systems, which can be integrated into IBM�s WebSphere division �to put together industry solutions that bring all those bits and parts together,� said Benoit Lheureux, vice president at research firm Gartner Inc.
IBM�s acquisition includes Sterling�s three Java-based suits: Sterling Business Integration Suite, the Sterling Selling and Fulfillment Suite, and Sterling Total Payments. IBM expects Sterling�s Business Integration Suite to top its impact on an estimated $5 billion per year market, according to a Gartner study. Gartner also expects the B2B software integration market to grow 10% per year.
�This is a growth market and it’s growing faster than the industry,� Craig Hayman, general manager of the WebSphere unit of IBM Software Group. �This is the right step for both Sterling Commerce and IBM.�
�IBM and Sterling Commerce are a great and natural fit,� said Bob Irwin, Sterling Commerce president and CEO. The acquisition opens Sterling�s capabilities to vertically integrate globally and into other lucrative markets such as health care, he added.
The share of IBM�s revenue derived from software sales has climbed to 42% of total revenue from 34% since 2004, which IBM expects software sales to reach half its total revenue by 2015.
The acquisition is anticipated to finalize during the second half of 2010. IBM did not offer an outlook for when Sterling�s earnings will become fully accretive.
AT&T said it expects approximately $750 million in pre-tax gains for the quarter in which the deal is closed.
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