Business

IBM makes big acquisition

Posted May 24, 2010 10:43 a.m. EDT

— IBM (NYSE: IBM) says it is buying AT&T's Sterling Commerce unit, which makes business collaboration software, for $1.4 billion.

The deal announced Monday would be IBM Corp.'s largest acquisition since it bought Cognos in 2008.

"The acquisition ... will expand IBM's ability to help organizations create more intelligent and dynamic business networks by simplifying and automating the way they connect and communicate with customers, partners and suppliers both on-premise or through cloud computing delivery models," IBM said in a statement.

Sterling Commerce maintains a customer base of “more than 18,000” companies worldwide, according to IBM. Customers include H.J. Heinz Co., Motorola Inc., Boise Cascade LLC and Boston Market Corp.

Its software is used for “interactions” between clients in a variety of market segments.

"Our integration solutions enable our customers to connect people, processes and technologies, so they can have seamless and secure integration with any partner, any system, anywhere," Sterling says on its web site.

IBM and AT&T would not disclose Sterling's revenues.

Some 2,500 Sterling employees will be made part of IBM's WebSphere group.

The deal is expected to close in the second half of this year.

AT&T Inc., then known as SBC Communications, paid $3.9 billion for Sterling in 2000, near the peak of the Internet bubble. The price tag was driven by forecasts that all “business to business” commerce would soon be conducted through online marketplaces not unlike a stock exchange, with demand dictating prices more efficiently.

“IBM sees these interactions growing dramatically due to the proliferation of electronic business transactions, from banks exchanging transaction data and manufacturers sourcing raw materials electronically, to retailers automating stock replenishment and managing orders online. Such intelligent transactions, and the software that supports them, help deliver the agility businesses need to be successful,” IBM said in the announcement.

“By acquiring Sterling Commerce technology and its large trading partner network, IBM anticipates it will be able to deliver powerful new cross-channel solutions to its clients,” the company added.

The unit has little connection to AT&T’s main telecommunications business and has maintained its own brand.

AT&T spokeswoman McCall Butler said AT&T’s business has changed since 2000, and Sterling is “no longer core to the company’s long-term strategic objectives.”"Businesses today are operating in a highly competitive global environment in which lines between actions taking place within and outside an organization's four walls are blurring," said Craig Hayman, general manager of IBM's WebSphere group.

"This acquisition will give IBM new tools to help clients build dynamic business networks that connect partners, suppliers and clients and deliver a consistent customer experience across channels," he added. "In addition, the fact that much of this can be done in the cloud will make it compelling to large numbers of our customers."

IBM employs some 10,000 people at its campus in RTP.