IBM Expands Smarter Commerce Initiative With DemandTec Acquisition

IBM said the acquisition of San Mateo, Calif.-based DemandTec would bolster its "Smarter Commerce" initiative, a potential market that IBM puts at $20 billion in software alone.

Under the all-cash offer IBM will pay $13.20 per share of DemandTec stock for a total price of $440 million, net of cash. The deal, expected to close in the first quarter of 2012, is subject to approval from DemandTec shareholders and government regulators.

DemandTec's on-demand software is used by businesses to analyze marketing and merchandising data, helping them develop the best price points and product mixes based on online and in-store customer buying trends.

DemandTec's customers include retailers such as grocery store operators, drug store chains, office supply retailers and clothing stores; and manufacturers of consumer packaged goods. Best Buy, Petco, Home Depot and Target are among the software's users.

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IBM launched its Smarter Commerce initiative earlier this year, developing channel partner certifications and e-commerce consulting services around its 2010 acquisitions of e-commerce software vendor Sterling Commerce ($1.4 billion), interactive marketing application developer Unica ($480 million) and Web analytics software vendor Coremetrics (acquisition price undisclosed).

In May IBM began offering resellers up to 50 points of margin for selling Smarter Commerce software to mid-market customers under the IBM Software Value Plus program. They also get 12-month, zero-percent financing for customer deals.

A report from Technology Business Research Group said the DemandTec acquisition bridges IBM's cloud and e-commerce efforts, "delivering all the value of Smarter Commerce in addition to the ease-of-use and cost advantages of cloud delivery."

DemandTec, which has more than 350 employees, will be integrated into IBM's Software Group.

IBM's buyout of DemandTec is the latest in a recent string of acquisitions of cloud software companies by major vendors. This week SAP said it will acquire SuccessFactors for $3.4 billion and Oracle is in the process of buying RightNow Technologies for $1.5 billion.