In a move to boost its integration business, IBM Corp. announced it has bought software manufacturer Ascential Software Corp. for US$1.1 billion in cash.

The deal, subject to Ascential shareholder and regulatory approvals, is valued at US$18.50 a share. It is expected to close sometime in the

second quarter of 2005, company officials said.

Big Blue’s information integration business produced triple-digit growth in 2004. Its software division alone accounted for $15 billion or roughly one third of IBM’s total revenue last year, according to the company.

Ascential reported a 46 per cent total revenue increase to $271.9 million in 2004. The Westborough, Mass.-based firm sells software that extracts data from various sources, reformats it and moves it between different applications. Its software is used to build enterprise data warehouses, power business intelligence systems, consolidate enterprise applications and create and manage master repositories of critical business information.

Once the acquisition is complete, Ascential will operate as a business unit within IBM’s information management software division, led by the IBM division’s general manager, Janet Perna. Ascential software already integrates with IBM WebSphere Business Integration software as part of a service-oriented architecture.

In a telephone conference call, Perna said IBM is “”extending offers to all of the Ascential team.”” She said Pete Fiore, president of Ascential Software, will report to her once the deal has closed.

Fiore said the acquisition reflects IBM’s shared perspective of data integration and the value that Ascential can provide to customers and IBM as part of its information management division.

“”We see the combination of two leaders with complementary technologies coming together to create a stronger leader in the information management marketplace,”” said Fiore.

Ascential and IBM, which have been working together for four years, have more than 550 combined customers who are using IBM information integration products along with Ascential software products.

Long time IBM customer National Bank of Canada (NBC) is currently working with both companies, according to Ascential’s most recent earnings report.

Fiore pointed to Ascential and IBM’s work with Canadian Tire as an example of the synergies between the two companies in that it brings together several strategic initiative capabilities within IBM including business intelligence and business performance management.

IBM’s software division has made 21 acquisitions in the last four years, including this one. The company decided to acquire Ascential rather than build up its information integration portfolio itself, Perna said.

“”It’s about being able to take advantage of market momentum as well as getting to market faster with this capability,”” Perna said.

In Canada, data integration software, which includes data management, data movement and replication software, accounts for $70 million in total vendor revenue, according to IDC Canada. Between 2003 and 2004, the data integration market in Canada grew eight per cent.

“”Growth will continue at that pace through 2008 as Canadian organizations try to get a hand on greater visibility into their data assets,”” said David Senf, program manager at IDC Canada.

Fiore said the merger will also allow both companies to pool their resources to capitalize on the trend of consolidation in the business software market.

“”We hear from our customers their preference to work with vendors that are able to provide a broad platform,”” said Fiore.

Dana Gardner, senior analyst at the Yankee Group, described the merger as a supply-and-demand issue.

“”There’s lots more data from lots more sources that needs analysis,”” said Gardner. “”Data integration is really an abstract value above just gathering data.””

Gardner added RFID technology, for example, is creating an “”ocean”” of data. “”Companies need to be able to pull that together and analyze it to bring to their business process the most relevant data to each and every business decision,”” he said.

Cognos also announced last year that it is working with Ascential by integrating Ascential MetaBroker data integration software with its ReportNet business intelligence software.

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