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Update: IBM to buy Sterling Commerce from AT&T for $1.4B

Acquisition would mark return of IBM to B2B services business

By Chris Kanaracus
May 24, 2010 12:45 PM ET

IDG News Service - IBM has agreed to buy AT&T subsidiary Sterling Commerce, a maker of business-to-business data integration software, for about $1.4 billion in cash, the companies announced Monday.

The pending acquisition will bolster IBM's burgeoning portfolio of data management software. Sterling Commerce's capabilities, combined with IBM's own middleware and analytics products, will help companies respond more nimbly to sudden business challenges," IBM said.

Sterling's platform helps companies exchange documents and other information, as well as tie together business processes. The company competes with GXS, Inovis and Axway and other companies.

Sterling Commerce counts about 18,000 customers in the financial services, retail, manufacturing and other industries, according to a statement.

The deal is expected to close in the second half of this year.

Roughly 2,500 Sterling Commerce employees will join IBM's WebSphere division after the deal's close, according to a statement.

The acquisition is IBM's 57th since 2003, and follows its recent move to purchase application integration vendor Cast Iron Systems.

The Sterling deal was "not a very well-kept secret" in industry circles, with rumors floating around for quite some time, according to Forrester Research analyst Ken Vollmer.

Sterling Commerce is "a solid number two" after GXS in the business of providing B2B services, Vollmer said. There could be additional acquisition activity in the market during the next couple of months, he added.

IBM chose Sterling based on business results and customer satisfaction levels relative to rivals in the market, said Craig Hayman , general manager of WebSphere, during a conference call today. "The difference was not trivial."

Sterling is itself the product of some consolidation, having purchased supply chain application vendor Yantra in 2005 and Nistevo, maker of transportation management software, in 2006.

With the pending deal, IBM is making a fresh start in B2B services, having sold off related businessesto GXS in 2004.

The acquisition reflects the fact that vendors need dedicated B2B capabilities when trying to serve large customers, Vollmer said.

The companies bring respective strengths to the table, Altimeter Group analyst Ray Wang said in a blog post.

"[Sterling] built a reputation connecting businesses with their trading community of suppliers, customers, banks and transportation providers. IBM built a strong platform for inter-enterprise integration and SOA governance," he wrote. "Should the acquisition succeed, customers will gain integration across business networks and improve decision making through richer integration."

IBM intends to bring together Sterling's technology with its own "in a way that supports what the Sterling customer set and the IBM customer set wants to do," Hayman said.

Reprinted with permission from IDG.net. Story copyright 2014 International Data Group. All rights reserved.
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