IBM will expand its data-integration product line through a $1.1 billion acquisition of Ascential Software Corp., the company said Monday. Under the deal, which is subject to regulatory approvals and other closing conditions, IBM will pay $18.50 per share for all outstanding shares of Ascential. The acquisition is expected to close in the second quarter.
Ascential specializes in software that aggregates data from across a company for analysis and provides executives with a high-level view of business conditions. It has more than 3,000 customers, including Jenny Craig, Mutual of Omaha, and Pfizer. About 550 of those are joint customers with IBM.
IBM's purchase offer represents an 18% premium over Ascential's closing stock price Friday of $15.70 and reflects Ascential's rapid growth. The software developer's sales in 2004 grew 46% to $271.9 million.
IBM is clearly confident that the growth will continue. Company officials point to an IDC study that predicts enterprise spending on data-integration tools and services will grow from $9.3 billion in 2003 to $13.6 billion in 2008.
Other vendors are also chasing the market. Last week, for instance, Microsoft said it would purchase Groove Networks Inc. to bolster its software's information-sharing and collaborative capabilities. During a conference call Monday, Ascential chairman and CEO Peter Gyenes said IBM's purchase of his company could be seen as "an offensive move" against Microsoft, Oracle, and other middleware vendors.
Gyenes will join IBM and report to Janet Perna, general manager of IBM's information-management software division, within which Ascential will become a business unit.
The acquisition is in keeping with IBM's strategy of building out a rich middleware portfolio through acquisitions. Last July, the company acquired Alphablox, a maker of software that lets users create a visual representation of business data. In April, IBM purchased systems-management vendor Candle. In 2003, the company bought middleware developers ThinkDynamics and Green Pasture Software. IBM purchased development-tools maker Rational Software for $2.1 billion in 2002. Under CEO Sam Palmisano, IBM has made more than a dozen acquisitions, for a reported total of more than $6 billion.
In some ways IBM's acquisition of Ascential isn't a surprise, says Judith Hurwitz, president of consulting firm Hurwitz Associates. Ascential was part of database vendor Informix and was spun out as an independent company when IBM acquired Informix in 2001. Since then Ascential has been on its own shopping spree, acquiring Torrent Systems, Vality Technology, and Mercator Software in recent years as it expanded its data-integration, data-cleansing, and metadata-management product offerings.
"This will fill a real need in IBM's [software product] stack," Hurwitz says. "Their products already work together seamlessly. It was just a logical move." IBM, in turn, will provide the sales, support, and consulting manpower that the smaller company was unable to muster, she says.
IBM's acquisition of Ascential could complicate its partnership with Informatica Corp., also a maker of data-integration tools. IBM optimizes Informatica's data-integration software to run on WebSphere and also markets Informatica products through its Business Consulting unit. Perna said she hopes Informatica would be willing to continue the partnership despite IBM's acquisition of a competitor.
Ascential's software is "a strong complement" to IBM's existing integration products, Perna said. Under one scenario, a company looking to consolidate data from multiple ERP systems into a single system could use IBM's WebSphere Information Integrator to access data stored on mainframes and other servers for profiling. Ascential's data-migration tools could then be used to pull the data into the single system.
IBM officials say they don't anticipate any significant layoffs at Ascential as a result of the buyout. Ascential is headquartered in Westboro, Mass.