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May 24, 2010

Why IBM is buying Sterling Commerce for $1.4bn

IBM announced it will pay $1.4bn in cash to buy B2B integration and e-commerce software player Sterling Commerce from owner AT&T.

By Jason Stamper

Sterling Commerce was bought by SBC Commmunications for $3.9bn at the height of the dot-com boom, but the deal was not a run-away success. SBC tried to sell Sterling Commerce to different investors including Bain back in 2002 but couldn’t get the price it wanted (around $1.5bn back then) and ended up hanging onto it.

AT&T merged with SBC in 2005, and it’s taken AT&T another five years to decide that an e-commerce and integration software firm still doesn’t make a lot of sense being part of a telecoms giant. It also finally got the kind of purchase price that it needed to avoid total embarrassment.

Anyway the Sterling Commerce business is said to be profitable, and IBM says it’ll be a good fit in its WebSphere business. It’s a fresh start for IBM in the B2B e-commerce and integration space, in the sense that it actually sold some technology in that market to GXS back in 2004.

“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 Craig Hayman, general manager, WebSphere, IBM. “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.”

Since 2003, IBM has acquired 57 software companies for around $13 billion.



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