May 27, 2010, 6:44 PM

IBM’s purchase of Sterling Commerce bolsters its e-retail software offering

International Business Machines Corp.’s planned acquisition of Sterling Commerce, an e-commerce and supply chain technology subsidiary of AT&T Inc., aims to bolster IBM’s framework that supports retailers and manufacturers.

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

The acquisition is one of several anticipated moves aimed at bolstering IBM’s products and services for retailers and manufacturers, says Craig Hayman, general manager, IBM WebSphere, IBM’s e-commerce platform software. And Sterling Commerce’s offerings complement IBM’s business software portfolio, he says.

Sterling sells software that helps more than 18,000 retailers, manufacturers, distributors, and financial services providers collaborate on processes such as selling and order and logistics management. Sterling allows users to access that collaborative data via a hosted Internet-based system, commonly called the cloud.

“This is a rapidly growing area that is very attractive to companies because of the cost savings they can achieve from automating and improving the relationships with their trading partners,” says Hayman. “It’s very rare a business transaction is handled by one company rather than by a network of companies. What this allows us to do is make that integration a much more efficient process.”

Allowing companies to handle those transactions in a cloud makes the offering even more compelling—particularly since IBM expects the number of online transactions among businesses to triple by 2013, he says.

The pending acquisition is part of IBM CEO Sam Palmisano’s plan to invest $20 billion in acquisitions by 2015—mostly to bolster its software business, Hayman says. Since 2003, IBM has acquired 57 software companies for about $13 billion. Those acquisitions are aimed at developing a comprehensive arsenal of business- to- business tools. “They’re decisively assembling a lotta B2B horsepower,” wrote Benoit Lheureux, Gartner Inc. analyst, in a blog post.

While IBM has primarily focused on software acquisitions that deal with business intelligence and analytics, the acquisition of Sterling Commerce adds a back-end counterweight to those offerings, analysts say.

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

Sterling has been part of SBC Communications, which is now AT&T, since the company bought Sterling in 2000 for $3.9 billion. AT&T says Sterling 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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