In a move to boost its integration business, IBM Corp. Monday 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 up from its closing price of US$15.70 on the Nasdaq last week. 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 its 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 its general manager, Janet Perna. Ascential software already integrates with IBM WebSphere Business Integration software as part of a service oriented architecture.
Asked whether IBM will keep the Ascential brand name, Perna said the terms of the agreement will be worked out within the next six to eight weeks.
In a telephone conference call, Perna said IBM is “extending offers to all of the Ascential team” and that it has no plans to move people to its White Plains, N.Y office.
“IBM software group has a large presence in the Boston area and this will add to it,” said Perna, adding that 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 very 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 over 550 combined customers who are using IBM information integration products along with Ascential software products.
Long time IBM customer National Bank of Canada (NBC) recently worked with IBM’s Business Consulting Sersvices (BCS) and is currently working with both companies, according to Ascential’s most recent earnings report.
Fiore said he anticipates Ascential’s work with IBM’s BCS division, which has comprised a significant part of its partnership with IBM over the years, to be “very positively enhanced.”
“The strategies of BCS — like many of the strategies of IBM — are oriented towards operating and supporting heterogeneous environments,” said Fiore, adding he expects IBM to continue to do that. “This presents an opportunity for the BCS organization to develop more resources, more capabilities, more skills complemented with information integration technology.”
Fiore also pointed out Ascential and IBM’s work with Canadian Tire as another 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 alone has made 21 acquisitions in the last four years including this one. IBM decided to acquire a company 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. “Ascential has very strong domain expertise and experience in the whole data placement, data transformation and data cleansing area of the marketplace.”
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.
“That growth will continue on 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 added 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. “That combined with fact that the data integration market has increased its visibility strategically has attracted a lot of attention from virtually every large software company out there including Oracle, SAP, Microsoft.”
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 a 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.”
Ascential is also no stranger to acquisitions itself as it paid $106 million to acquire data integration software company Mercator Software in 2003.
“We expect to be as good an integratee as we were an integrator,” said Fiore.
Also Cognos announced last year that it is working with Ascential by integrating Ascential MetaBroker data integration software with its ReportNet business intelligence software.