IBM Eyes Bigger Picture with Sterling Commerce Purchase

June 7, 2010
Buys software manufacturer for $1.4 billion, with plans to spend $20 billion on further acquisitions over the next five years.

Flush with cash, and eager to take advantage of an IT market still reeling from the prolonged economic malaise, IBM recently completed what is believed to be the first of a series of strategic acquisitions, by purchasing Sterling Commerce, a unit of AT&T, for $1.4 billion.

Sterling Commerce is a manufacturer of software that automates the exchange of documents and transactions between companies. This is an area that is expected to see significant growth in the coming years. According to several reports, IBM projects online transactions with suppliers and partners to triple by 2013.

In the first quarter of 2010, IBM spent just about the same amount of money in acquisitions as it did during throughout all of last year. The company estimates it will spend $20 billion on acquisitions over the next five years to counter the expected moves of rivals such as Hewlett-Packard, Cisco Systems and SAP realign for strategic growth in new areas.

IBMs push into the software side of business has proven to be among its most profitable and fastest growing ventures.

The acquisition will give IBM new tools to help clients build dynamic business networks that connect [software across different servers], said Craig Hayman, general manager of IBMs WebSphere business, during a conference call. In addition, the fact that much of this can be done in the cloud will make it compelling to large numbers of our customers.

Cloud computing is one of the fastest-growing segments of the software industry today, allowing applications to be accessed online as opposed to limited to within company-specific systems.

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