May 24, 2010, 4:31 PM

IBM agrees to acquire Sterling Commerce for $1.4 billion

IBM today agreed to acquire Sterling Commerce, an e-commerce and supply chain technology subsidiary of AT&T Inc. for approximately $1.4 billion in cash.

International Business Machines Corp. today agreed to acquire Sterling Commerce, an e-commerce and supply chain technology subsidiary of AT&T Inc., for approximately $1.4 billion in cash.

Sterling sells software that helps more than 18,000 clients in the retail, manufacturing, distribution, communications and financial services industries collaborate on processes such as selling, order management and logistics management. Sterling allows users to access that shared data via a hosted Internet-based infrastructure, commonly called the cloud.

“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,” says Craig Hayman, general manager, IBM WebSphere. “In addition, the fact that much of this can be done in the cloud will make it compelling to large numbers of our customers."

Sterling’s offerings complement those of IBM’s business software portfolio, says Hayman. In particular, he says it will bolster IBM’s framework that supports the retail and manufacturing industries.

Sterling’s roughly 2,500 employees will be folded into IBM's WebSphere unit, says Hayman.

The acquisition is part of IBM CEO Sam Palmisano’s plan to invest $20 billion on acquisitions by 2015—mostly to bolster its software business, said Hayman. Since 2003, IBM has acquired 57 software companies for about $13 billion.

Sterling has been part of SBC Communications, which is now AT&T, since SBC bought Sterling in 2000 for $3.9 billion. But AT&T says the company is now outside its core businesses. AT&T does not break out Sterling's revenue, but AT&T's “other” businesses, of which Sterling is a part, contributed about $1.2 billion to the company’s 2009 revenue.

The purchase is set to close in the second half of the year.

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