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IBM Ponies Up $1.2B for Metrics Firm SPSS

IBM acquires SPSS
IBM said this morning it has reached an agreement to acquire SPSS, a publicly traded firm based in Chicago that specializes in sophisticated business analytics, for $1.2 billion.

The Armonk, N.Y.-based computing giant said the acquisition aims to shore up its Information on Demand (IOD) unit by moving further into an area it refers to as predictive analytics, essentially parsing data to glean insight into customer behavior and spot emerging trends.

"With this acquisition, we are extending our capabilities around a new level of analytics that not only provides clients with greater insight -- but true foresight," Ambuj Goyal, IBM's (NYSE: IBM) general manager of information management, said in a statement.

Speaking to reporters on a conference call, Goyal said IBM is aiming to help its business clients "move from sense-and-respond to predict-and-act."

"This is big," he said. "Every industry, every client, every geography is requesting an information-led strategy."

Once completed, the SPSS buy would mark the 27th firm IBM has snapped up as it has built out its IOD platform. Other big buys include the $5 billion purchase of the business intelligence firm Cognos in 2007 and the 2006 purchase of content management provider FileNet for $1.6 billion.

IBM also chose today to take the wraps off its Smart Analytics strategy, which it's billing as an integrated platform that will bring together IBM's various data-intelligence offerings as it makes a major push into helping businesses make smarter, data-driven decisions.

"What we've been talking about is an information-led transformation," Goyal said. "Information-led transformation will create this next generation of efficiency for business over the next decade or two."

Today's all-cash acquisition values SPSS (NASDAQ: SPSS) at $50 per share, a 42 percent premium over the firm's closing price on Monday. Shares of SPSS rose more than 40 percent in early trading this morning.

IBM and SPSS have already partnered on numerous initiatives. Jack Noonan, SPSS's president and CEO, hailed the merger as "transformative" and "highly complementary."

"I titled my all-company announcement this morning 'exciting times,'" Noonan said. "Let me tell you, the halls are buzzing at SPSS."

IBM already has a litany of applications in its IOD portfolio where SPSS's technology could help, such as helping companies detect fraud, improving health outcomes for patients and forecasting demand.

Big Blue is pitching the merger as a shot in the arm for its newly formed Business Analytics and Optimization Consulting structure, a unit that offers clients strategic guidance through data analysis.

SPSS's brand of analytics helps companies gather and harvest data to make business predictions, such as how consumers will react to a marketing campaign.

Standard & Poor's analyst Tom Smith saw the news as a positive sign for IBM, saying he expected that the "initial cost and integration challenges will be outweighed by product enhancements and cross-selling opportunities." Smith reiterated the ratings firm's "strong buy" opinion on IBM.

For organizations across the private and public sectors, the idea of better data driving better decisions is an alluring one. IBM boasts that the SPSS acquisition will deliver the type of predictive technology that could help a metropolitan police department put more cops on the beat in areas that data models have identified as emerging hot spots for crime.

IBM is also positioning the business analytics aspect of the deal to give a boost to retailers, who could use its service to predict emerging consumer trends and inform product and marketing decisions.

It could even help political operatives with the sort of micro-targeting efforts used to identify the pockets of voters within a district who might still be on the fence about an issue or a candidate, and target their messages accordingly.

Jeff Golberg, an analyst with the research firm Celent, said in an e-mail to InternetNews.com that IBM's SPSS buy "fits the current trend in the business analytics space of focusing on actionable intelligence."

The transaction is subject to regulatory and shareholder approval, and IBM said it expects to close the deal later this year.

Once the acquisition closes, IBM said it plans to roll SPSS into its Information Management software portfolio.

Shares of IBM were trading down 0.44 percent at press time, at $117.11.

Update adds remarks from conference call, analyst comments.