IBM To Snap Up Rational Software For $2.1 Billion

This purchase, worth about $10.50 a share, is IBM's largest software buyout since it paid $3.5 billion for Lotus Development Corp. in 1995.

Rational, Cupertino, Calif., makes software development tools and development environments for both the J2EE environment IBM has ardently espoused and the rival Microsoft .Net framework. Its cross-platform support of Windows and Linux jibes well with IBM's own operating-system open-mindedness.

With the completion of the deal, IBM plans to integrate Rational's lineup more closely into its own offerings and continue to invest in Rational's own offerings for systems integrators and ISVs, according to a statement. Rational president Mike Devlin will become general manager of a new division within IBM Software, reporting to Steve Mills, IBM senior vice president and software group executive.

Rational generated $689 million in revenue for its fiscal year ending March 31, 2002.

The deal is expected to close, pending shareholder and regulatory approval, in the first quarter of next year.

In late October, IBM CEO Sam Palmisano promised the company would be aggressive in snatching up technology properties. He is being true to his word: A week later, IBM Software said it would buy privately held Tarian Software, a content management specialist, for an undisclosed amount.