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10/21/2011
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IBM Completes Algorithmics Buy

Software developer's products help banks and other financial services players identify and reduce risk.

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IBM said Friday that it has completed its $380 million acquisition of Algorithmics, a Toronto-based developer of risk management software. The move is the latest in a string of deals Big Blue has made in recent months as it looks to broaden its portfolio of analytics software.

Algorithmics products are used by banks, insurance companies, pension funds, and other financial services companies to assess risks in their operations through computer-based tools like Monte Carlo simulation.

IBM officials said they expect to see strong demand for Algorithmics' software as the financial services industry comes under increasing pressure to harden operations against the type of large, unforeseen losses that brought down several major Wall Street investment banks, including Lehman Brothers, during the 2008 financial industry crisis.

Algorithmics offers tools that allow its customers to conduct stress testing, compliance checks, and operational risk assessment, among other things. The company's customer roster includes The Allianz Group, HSBC, Societe General, and Scotia Capital.

"Integrated risk management continues to be a challenge across insurance and financial services industries as data grows in complexity and new regulations continue to be introduced," said Rob Ashe, IBM's general manager for Business Analytics, in a statement.

Algorithmics operates from 20 worldwide locations. IBM said it plans to add the company's 900 employees to its Software Group.

Over the past five years, IBM has spent more than $14 billion acquiring business intelligence and analytics software companies to bolster the unit. Last week, it said had reached an agreement to buy cloud infrastructure specialist Platform Computing, of Toronto, for an undisclosed sum.

In September, IBM announced a deal to acquire i2, a Cambridge, U.K.-based company that develops software that helps organizations use data analysis to detect fraud and spot security threats.

IBM last year spent $1.7 billion to acquire data warehousing and analytics specialist Netezza, and in 2009 it bought out statistical analysis software developer SPSS for $1.2 billion. In 2008, IBM acquired business intelligence vendor Cognos for $5 billion.

IBM on Monday reported solid third-quarter results across its major business lines. For the three-month period ended Sept. 30, IBM said total sales came in at $26.16 billion, up 7.8% from the same period a year ago. Earnings per share were up 13.1% to $3.19, on net income of $3.84 billion.

IBM shares gained 2.47% Friday, to close the week at $181.63.

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