NEW YORK IBM (IBM.N) said on Tuesday it plans to expand its software and services business by acquiring Coremetrics, a privately held web analytics software company that helps companies improve their marketing.
Terms of the deal, which developed from an existing partnership between the two companies, were not disclosed.
Coremetrics, with over 200 employees, offers customers like Bank of America (BAC.N), 1-800 Flowers FLOWS.O and Victoria's Secret LTD.N, analysis of social networks and online media, helping them create more effective marketing campaigns.
The deal comes as International Business Machines Corp is seeking to further focus on profitable software and business services rather than hardware. It bought PwC Consulting from PricewaterhouseCoopers in 2002 and sold its personal computer business to Lenovo Group (0992.HK) in 2005.
IBM said the latest deal will boost its services portfolio, specifically helping companies understand customers' shopping habits and measure the effectiveness of their marketing campaigns.
While IBM already recommends Coremetrics' services to its customers, ownership will allow it to invest in and expand the business further, it said.
Steve Mills, IBM's senior vice president and software group executive, said a joint company could better address the needs of customers who are increasingly looking to increase their online sales and marketing.
"Banking, travel and transportation... these aren't traditional retail but people these days do all those things online," he said. "We think we can make it a much bigger business as part of IBM."
The deal is expected to close in the third quarter of 2010, IBM said.
IBM recently announced plans to spend $20 billion on acquisitions through 2015. Rivals like Hewlett-Packard Co (HPQ.N), Oracle Corp ORCL.O and Dell DELL.O have also been scouring for deals as they compete to offer a broad set of products and services.
Coremetrics' main rival is Omniture, which was bought by Adobe Systems Inc (ADBE.O) last year.
IBM shares were up 0.6 percent at $129.27 by late morning, while the broader market was up around 1 percent.
(Reporting by Ritsuko Ando; Editing by Derek Caney, Dave Zimmerman)