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Rational Buy To Bolster IBM Developer, Middleware Efforts

IBM hopes its proposed $2.1 billion buyout of tool maker Rational Software will bring thousands more developers into IBM Software's fold, bolstering its middleware efforts.

Executives from both companies positioned their product lines as complementary.

"We focus on language-based tools [around Java, C, C++, Cobol. Rational has always provided surrounding capabilities, analysis, design, test, library services. [The combination builds out the total workbench," said Steve Mills, IBM senior vice president and Software Group general manager.

Both companies also have stressed cross-platform support for Windows and Unix. In fact, Rational has successfully straddled J2EE and Microsoft's rival .Net framework.

IBM, which has not officially blessed Microsoft's .Net game plan but has pledged to interoperate with it, sees Rational's expertise there attractive. "They have a big business there and do very well. They do analysis, modeling, design and testing for .Net as well as WebSphere Studio. This will give customers a way to integrate [those environments," said Scott Hebner, director of marketing for IBM's WebSphere. "We need to unify and support a broad set of architectures," he said.

Rational will become the fifth division and brand within IBM Software, joining Lotus, DB2, Tivoli and Websphere. Current Rational President Mike Devlin will become general manager of this new division. The blockbuster buyout was announced Friday morning. (See related story.)

Along with Rational's 3,500 employees, IBM will gain access to 50,000 Rational customers and 600,000 developers, said Hebner. Rational is based in Cupertino, Calif., and Lexington, Mass.

Industry observers say J2EE and .Net are rival enterprise development frameworks to watch and IBM has been solidly in the first camp. But Mills downplayed any animus against Microsoft. "We have more products on Windows than they do. We may not recognize as much revenue as they do but increasingly applications are written more to middleware than to the operating systems," he said.

IBM partners were enthusiastic about the opportunities the deal could afford them. "There are a lot of competitive accounts not using IBM software that use Rational. This will bring them into the fold," said Doug Pelletier, president of Trifecta Technologies, an Allentown, Pa., IBM solution provider.

Rational's offerings already work well with WebSphere Studio and are part of the IBM-backed Eclipse open-source tools framework.

Lewis Johnson, president of Siwel Consulting, New York said, "IBM is moving in the right direction when it comes to software. It has the best set of tools in WebSphere brand. Anything they can add to the arsenal helps."

In late October, IBM CEO Sam Palmisano promised to spend aggressively to bolster the company's position. Within a week of his comments, IBM bought Tarian Software, a content management specialist, for an undisclosed sum. News of the surprise Rational buy comes just a month later. This is IBM's largest software acquisition since it paid $3.5 billion for Lotus in 1995. It bought Tivoli a few years later and in April 2001 bought Informix's database business for $1 billion.

The latest move shows IBM wants to make business processes the next true battleground, said Dana Gardner, analyst at the Aberdeen Group. "IBM and Rational together allow for professional services, rapid app development and process integration to rise as the next level where businesses compete."

Both companies expect the deal to close in the first quarter of next year, pending regulatory and shareholder approval.

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