IBM’s $1.4bn move to buy software firm

City A.M. Reporter
IBM plans to buy Sterling Commerce from AT&T for about $1.4bn (£970m) in cash, extending the technology behemoth’s portfolio of business software.

The move comes amid a flurry of software acquisitions by International Business Machines, Oracle and SAP, as they look to sell a broad set of products and services to large corporations.

IBM, led by chief executive Sam Palmisano, said earlier this month it plans to spend $20bn on acquisitions over five years to 2015, shifting its focus to software from hardware.

It bought PwC Consulting from PricewaterhouseCoopers in 2002 and sold its personal computer business to Lenovo Group in 2005.

Sterling provides software and networking services that help companies securely transfer electronic documents such as purchase orders, payroll information, invoices and healthcare claims. It is the number two player in the field after privately held GXS.

IBM currently does not have that technology in house, said Forrester Research analyst Ken Vollmer, who predicted that Oracle might be forced to respond by acquiring another provider of such products.

Oracle currently offers such technology through a partnership with privately held E2open, according to Gartner analyst Benoit Lheureux.

AT&T expects to record a one-time gain of about $750m in the quarter the transaction closes.

After the deal closes in the second half of 2010, Sterling Commerce’s 2,500 employees will be part of the WebSphere organisation within IBM’s Software Group.

SBC Communications bought Sterling Commerce in 2000, during the height of the boom for $3.9bn, throwing itself into the business-to-business e-commerce market. SBC acquired AT&T Corp in 2005, and changed its name to AT&T.

Sterling was founded in the 1970s and has some 18,000 customers.