By Julie Alnwick and Kelly Riddell
July 28 (Bloomberg) -- International Business Machines Corp., the world’s biggest computer-services provider, agreed to buy SPSS Inc. for about $1.2 billion in cash to gain software that helps businesses analyze and predict trends.
The per-share price is $50, the companies said today in a statement. That is 42 percent more than Chicago-based SPSS’s closing stock price yesterday. The $1.2 billion price includes convertible debt, restricted share units and other items, according to IBM.
IBM, led by Chief Executive Officer Sam Palmisano, will use the purchase to bolster the software business, where profit margins are more than twice as big as in services. Palmisano pledged this year to “go on offense” in the global recession, making acquisitions and investing in research. This month, IBM raised its full-year profit forecast to at least $9.70 a share from $9.20.
“This year is going to be a down year for many IT software services -- however, SPSS’s analytics business is expecting growth,” said Andy Miedler, a St. Louis-based analyst at Edward Jones & Co. “That speaks well to the areas IBM is choosing to invest in, and it furthers their business transformation into a software leader.” He advises investors to buy IBM stock.
Armonk, New York-based IBM dropped 88 cents to $116.75 at 3:10 p.m. in New York Stock Exchange composite trading. SPSS jumped $14.25 or 41 percent, to $49.34 on the Nasdaq Stock Market. The companies expect the transaction to be completed in the second half of the year.
SPSS’s Strengths
The SPSS purchase may add about 3 cents to IBM’s earnings next year, according to Maynard Um, a New York-based analyst with UBS Securities LLC.
“Although the EPS contribution is not material, we believe actual benefits may prove greater as the deal adds to IBM’s business and predictive analytics portfolio, which will be an essential part of IBM’s smarter business systems and which the company has identified as a significant growth opportunity over the next few years,” Maynard wrote today in a note.
SPSS’s technologies help businesses assess data, forecasting demand for their products and examining patterns to detect fraud, IBM said. The global market for analytics software probably will climb to $25 billion this year, IBM said, citing data from researcher IDC.
SPSS will give IBM a foothold in predictive analytics, a market that’s both growing and the future of data analysis, said Ambuj Goyal, general manager of information management at IBM.
Changing Analytics
“The world is moving from doing the analysis of data in the background by some business-smart guy,” to getting “real-time predictive answers without being an analyst,” Goyal said today in an interview.
SPSS had planned to report second-quarter results on Aug. 4. In the previous period, sales dropped 7.8 percent to $72.1 million, hurt by the global economic slump.
In July, IBM reported second-quarter earnings that exceeded analysts’ estimates, squeezing more out of declining sales after reducing jobs and managing projects more efficiently. Sales fell 13 percent as customers pared technology budgets to cope with the lengthening recession.
IBM has made about 80 acquisitions in hardware, software and services since Palmisano took the reins in 2002. Most of the deals, including the $4.5 billion purchase of Cognos Inc., have bolstered the software business. IBM had sought computer-server and program maker Sun Microsystems Inc., according to a person familiar with the matter. That bid dissolved after the companies disagreed on the price. Oracle Corp. later agreed to buy Sun for about $7.4 billion.
The SPSS purchase terms include a termination fee of $23.5 million that SPSS would pay should the merger fail.
IBM also said today it will buy Ounce Labs Inc., a Waltham, Massachusetts-based software maker.
(SPSS will hold a conference call at 10 a.m. New York time today to discuss the transaction. To listen, go to http://www.spss.com/invest.)
No comments:
Post a Comment