'Rational' Moves For IBM

IBM has agreed to pay approximately $2.1 billion in cash or $10.50 per share for Rational, which specializes in software-development tools. Rational will now become the fifth brand in IBM Software Group's portfolio, along with WebSphere, DB2, Lotus and Tivoli. "We've had a longstanding relationship [with Rational that goes back about 15 years," says Steve Mills, senior vice president and group manager of IBM Software. "We see this acquisition as allowing us to focus on the kind of end-to-end application development and business-process integration that customers are telling us they want."

But Rational isn't the only ISV purchased by Big Blue this year. The announcement caps off a busy year for IBM Software, which has made several acquisitions in 2002. Here's the list:

Rational Software

Announced: Dec. 6

Status: Pending

Price: $2.1 billion in cash

Bottom line: Big Blue will now have a complete software tool set and development environment that supports J2EE, Linux and Microsoft .Net standards, which will help IBM strengthen its capabilities in middleware integration and collaboration. Rational, which has more than 3,400 employees, boasts a strong following of software developers as well. The company, which generated more than $154 million in revenue in its second fiscal quarter ended Sept. 30, 2002, is large enough to be an IBM subsidiary, such as Lotus or Tivoli. For one, its customer list is impressive, with nearly all of the Fortune 100 companies, including IBM, using Rational tools and services. In addition, market research firm IDC estimates the market opportunity for application-development software will grow from $9 billion in 2002 to $15 billion in 2006. Being that Rational will become the fifth brand in the IBM portfolio, this is a huge acquisition for Big Blue.

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Tarian Software

Announced: Nov. 4

Status: Closed

Price: Financial terms not disclosed

Bottom line: Tarian, a privately held provider of e-records-management software based in Ottawa, Canada, was purchased by IBM to further build its enterprise-content management business within the IBM Data Management Software division. The 4-year-old company, which received $4 million in its second round of financing a year ago, was relatively small. Tarian's technology will be integrated into IBM's content-manager software, as well as DB2 and Lotus products. Still, Tarian is one of the smaller, less pivotal purchases for IBM this year.

Holosofx

Announced: Sept. 15

Status: Closed

Price: Financial terms not disclosed

Bottom line: Holosofx, a privately held business-integration software vendor based in El Segundo, Calif., was a quick acquisition for IBM; Big Blue announced it had acquired all outstanding shares of the company the day after the deal was closed, and Holosofx products were immediately available from IBM. Holosofx's technology, which includes business-process modeling and monitoring tools, complements IBM's WebSphere integration software and was the third acquisition of the year in the software-integration space for IBM. Holosofx, founded in 1990, had several brand-name enterprise customers and a longstanding partnership with IBM before the merger. While Holosofx was not IBM's biggest software integration acquisition (see CrossWorlds), it was still an important addition.

Access360

Announced: Sept. 3

Status: Pending

Price: Financial terms not disclosed

Bottom line: Access360, an Irvine, Calif.-based privately held software company, specializes in identity-management solutions, a potentially hot area as security technology gains more attention. Access360 was also the second purchase in less than a week on behalf of IBM's Tivoli brand, which has grown from a systems-management software vendor to now including a strong presence in storage and security solutions. IBM plans to integrate Access360's enRole identity-management solution into Tivoli's existing security portfolio. The deal marked a major step to building up Tivoli and an ongoing effort from IBM to become a market leader in identity management.

TrelliSoft

Announced: Aug. 29

Status: Closed

Price: Financial terms not disclosed

Bottom line: TrelliSoft, a privately held storage resource management software vendor based in Glen Ellyn, Ill., was a major purchase for IBM, albeit a small one. TrelliSoft was founded in 1999 and had just 30 employees, but the entry into the SRM market was an all-important move for IBM, which is looking to ride the growing storage-software wave through Tivoli. The TrelliSoft StorageAlert product line has been integrated into Tivoli's existing storage solutions. Giga Information Group predicts the SRM market will jump from $1 billion in 2000 to $5 billion in 2005, which puts IBM in position to take full advantage of a fruitful opportunity.

Metamerge

Announced: June 25

Status: Closed

Price: Financial terms not disclosed

Bottom line: Metamerge, a privately held Norwegian software company that specialized in directory integration, was another quick acquisition for IBM. The company was purchased to add directory-integration capabilities, including metadirectory tools that connect data across disparate systems, into all its software brands. It's an obscure area, but IBM says Metamerge's accurate directory infrastructure is a crucial integration component for DB2, WebSphere, Lotus and Tivoli. Still, Metamerge, like Holosofx, is a relatively small purchase for IBM's integration-software business.

CrossWorlds

Announced: Oct. 30, 2001

Status: Closed Jan. 14, 2002

Price: $129 million

Bottom line: CrossWorlds Software was one of the more important purchases for IBM Software in 2002, perhaps second only to Rational. CrossWorlds, formerly based in Burlingame, Calif., specialized in business-process integration software solutions and had a lengthy partnership with IBM. CrossWorlds' technology was assimilated into IBM's WebSphere brand and its MQSeries integration software. The acquisition gave IBM a boost in the vital area of middleware integration. CrossWorlds was an appropriate fit for IBM, supporting open Internet standards, such as J2EE and XML.