IBM acquires AT&T’s Sterling Commerce unit

Posted by admin on May 24, 2010 · Leave a Comment

IBM said Monday that it has agreed to acquire AT&T’s Sterling Commerce unit for $1.4 billion in cash.

Ohio-based Sterling makes technology that helps companies to do business with other companies. Its “business-to-business” software is used to automate processes such as the purchase or raw materials or the replenished of depleted inventory. About 80% of the Fortune 500 companies are clients, though revenue is less than $1 billion annually.

AT&T’s forerunner company, SBC Communications, bought Sterling at the height of the dot-com bubble in 2000 for $3.9 billion in stock. That puts the sale price to IBM 64% lower compared to what AT&T /quotes/comstock/13*!t/quotes/nls/t (T 24.33, -0.52, -2.09%) paid for the company a decade ago.

“Businesses today are operating in a highly competitive global environment in which lines between actions taking place within and outside an organization’s four walls are blurring,” said IBM WebSphere general manager Craig Hayman, in a statement.

The two companies expect the deal to be completed in the second half of the year, with 2,500 Sterling employees to be transferred to IBM /quotes/comstock/13*!ibm/quotes/nls/ibm (IBM 124.35, -1.07, -0.85%) . The Sterling unit will be “integrated” into IBM’s WebSphere organization in the parent company’s software group.

The move should bolster IBM’s already strong integration capabilities, and help it fend off competition from Oracle and Hewlett-Packard—both of which are also bulking up their enterprise software portfolios through buy outs.

“This acquisition will give IBM new tools to help clients build dynamic business networks that connect partners, suppliers, and clients and deliver a consistent customer experience across channels. In addition, the fact that much of this can be done in the cloud will make it compelling to large numbers of our customers,” said Hayman.

IBM said it plans to “continue to support” existing Sterling customers and “enhance” the company’s technologies. About 2,500 Sterling employees will be added to IBM’s WebSphere unit. Sterling counts about 18,000 customers worldwide.

“The broad global reach and additional capabilities IBM offers make this acquisition great news for our customers and partners,” said Sterling CEO Bob Irwin, in a statement.

“The combination of IBM’s products, services, and skills with the Sterling Commerce B2B integration and cross-channel capabilities resulting from this acquisition is unparalleled,” said Irwin.