IBM Buys Sterling Commerce from AT&T

On May 24, IBM purchased Sterling Commerce, a business-to-business provider, from AT&T for $1.4 billion cash. IBM plans to utilize Sterling Commerce's software to share and transfer information to other businesses and customers using cloud computing or on-premise means.

Sterling Commerce, a well-established provider of business transaction, selling, and fulfillment software, boasts over 18,000 clients across an array of industries that include distribution, financial services, retail, communications, and manufacturing. 

IBM's acquisition of the Ohio-based company will expand and simplify IBM's customer service capabilities and products through new cross-channel solutions, confirming them as prominent competitors to Cisco Systems and Hewlett-Packard. Business to business integration software is a $5 billion market, growing annually by 10 percent. 

Ray Wang, partner and research analyst for Enterprise Strategy at Altimeter Group and the author of software blog "A Software Insider's Point of View" writes, "IBM approached Sterling Commerce because of the rich customer base and its technology leadership in B2B Integration and Order Hubs. Over time, Sterling Commerce customers will gain a much needed middleware platform with a strong set of SOA and BPM tools. While AT&T did provide Sterling Commerce with tremendous autonomy, synergies were limited to channel sales and hosting…. Ownership by IBM fits into a larger dynamic business network vision which requires integration and is bounded by capabilities to enable commerce. IBM makes more sense as a home for Sterling Commerce and as a partner to AT&T."

IBM will continue to support Sterling Commerce clients while also improving Sterling Commerce technology.

"The broad global reach and additional capabilities IBM offers make this acquisition great news for our customers and partners," said Bob Irwin, chief executive officer, Sterling Commerce. "The combination of IBM's products, services and skills with the Sterling Commerce B2B integration and cross-channel capabilities resulting from this acquisition is unparalleled."

Sam Palmisano, CEO of IBM, confirmed IBM's agenda to seek continual transformation with establishing a high-value portfolio and securing higher growth businesses such as software. IBM also recently confirmed its intended allocation of $20 billion for takeovers during the next five years.

AT&T will reportedly receive $750 million in pretax gain from IBM when the deal closes in the late 2010. Following this close, a reported 2,500 current Sterling employees will make the transition to IBM's software division.

The purchase of Sterling Commerce is IBM's largest deal in almost three years.

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