* AT&T to post $750 million gain once deal closes
* Move helps bolster IBM's software, services business
* IBM plans to spend $20 bln in acquisitions through 2015
* IBM and AT&T shares fall slightly
(Adds analyst's comment, background on industry M&A trends)
By Ritsuko Ando and Jim Finkle
NEW YORK/BOSTON, May 24 IBM (IBM.N) plans to
buy Sterling Commerce from AT&T Inc (T.N) for about $1.4
billion in cash to expand its portfolio of software for
companies in financial services, manufacturing and retail.
Sterling's software and services help companies securely
transfer electronic documents, such as purchase orders, payroll
information, invoices and healthcare claims. It is the No. 2
player in the field after privately held GXS Inc.
"The market is fairly mature, with low growth in recent
years, but with potential for solid profitability," said Thomas
Weisel Partners analyst Tim Klasell.
International Business Machines Corp over the past decade
has been focusing on improving its profitability by
concentrating on high-margin software and services rather than
It bought PwC Consulting from PricewaterhouseCoopers in
2002 and sold its personal computer business to Lenovo Group
(0992.HK) in 2005. It recently announced plans to spend $20
billion on acquisitions through 2015.
Rivals like Hewlett-Packard Co (HPQ.N), Oracle Corp
ORCL.O and SAP AG (SAPG.DE) have also been scouring for deals
as they compete to offer a broad set of products and services
to business customers.
Forrester Research analyst Ken Vollmer predicted that
Oracle might respond to IBM's move on Sterling by acquiring
another provider of such products.
Oracle offers such technology through a partnership with
privately held E2open, according to Gartner analyst Benoit
Reuters Breakingviews [ID:nN24108118]
As for AT&T, it is selling Sterling at a substantial
discount to the $3.9 billion that SBC Communications paid for
the company at the height of the dotcom boom in 2000. SBC
subsequently became AT&T through a merger in 2005.
AT&T said it expects to record a one-time gain of about
$750 million in the quarter the transaction closes, expected to
be in the second half of 2010.
Sterling's 2,500 employees will be part of the WebSphere
organization within IBM's Software Group. It was founded in the
1970s and has some 18,000 customers.
Sterling said it enables more than 1 billion business
interactions a year for clients in financial services, retail,
manufacturing, communications and distribution. Analysts said
being part of IBM will help it boost its customer base.
"I think Sterling Commerce will get a lot of muscle from
IBM that will allow them to better compete with GXS,"
Forrester's Vollmer said.
IBM has not been alone in bulking up through acquisitions.
Hewlett-Packard bought EDS in 2008, and the past few months
have also seen a resurgence in M&A deals in the tech sector as
the economy recovers.
SAP said earlier this month that it plans to buy smaller
business software maker Sybase Inc SY.N for $5.8 billion.
Oracle last month extended its acquisitive streak with a $685
million deal for drug trial software maker Phase Forward Inc
On the New York Stock Exchange, IBM fell 69 cents to
$124.73 and AT&T was down 40 cents at $24.45 shortly before the
(Additional reporting by Franklin Paul, editing by Gerald E.
McCormick, Derek Caney and Richard Chang)