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IBM to acquire analytics firm SPSS for $1.2 billion

July 28, 2009

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IBM says it has agreed to acquire analytics company SPSS Inc. for a little over $1.2 billion in cash. The decision is intended to have access to software that helps companies better analyze and predict market trends.

The mutually-agreed per-share acquisition price is $50, the two companies said today in a press release. That is about 41.8 percent more than Chicago-based SPSS’s closing stock price on Monday. The $1.2 billion acquisition price includes convertible debt, restricted share units and other items, according to IBM.

Led by Chief Executive Officer Sam Palmisano, IBM will use the acquisition to bolster the software business, where profit margins are more than twice as big as in services. Palmisano pledged this year to go on offense in the global recession, making acquisitions and greatly increasing investments in R&D.

“Overall, 2009 is going to be a down year for many IT software services, but SPSS’s analytics business is expecting growth,” said Andy Miedler, a St. Louis-based analyst at Edward Jones & Co.

“That speaks volumes to the areas IBM is choosing to invest in, and it furthers their business transformation into a software leader.”

SPSS' stock jumped 40 percent on the news, to $49.17 on the Nasdaq Stock Market. The two companies expect the transaction to close in the second half of 2009.

SPSS had planned to report second-quarter results on Aug. 4. In the previous period, sales dropped 7.8 percent to $72.1 million, hurt by the global economic slump.

Two weeks ago, IBM reported second-quarter earnings that exceeded analysts’ estimates, squeezing more out of declining sales after reducing jobs and managing projects more efficiently. Sales fell 13 percent as customers pared technology budgets to cope with the lengthening recession.

Overall, SPSS’s technologies help businesses assess data, forecasting demand for their products and examining patterns to detect fraud, IBM said. The global market for analytics software probably will climb to $25 billion in 2009 and 2010, IBM said, citing data from researcher IDC.

Overall, since Palmisano became CEO of IBM in 2002, the IT behemoth has made over 80 acquisitions in hardware, software and related IT services.

Most of the deals, including the $4.5 billion purchase of Cognos last year, have greatly bolstered IBM's software business. The company had sought to acquire computer-server and software maker Sun Microsystems Inc., according to a person familiar with the matter.

That bid failed after the companies disagreed on the acquisition price. Database giant Oracle later agreed to buy Sun for about $7.4 billion.

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Source: IBM.