• October 19, 2010
  • By Juan Martinez, Editorial Assistant, CRM magazine

IBM Acquires Netezza for $1.7 Billion

As a response to IBM's own projections that the business analytics market will grow from $9 billion in 2009 to $16 billion by 2015, IBM recently announced its intention to purchase Netezza, a provider of data warehouse, analytic, and monitoring appliances, for approximately $1.7 billion (or roughly $27 per Netezza share). Though still subject to Netezza shareholder approval, applicable regulatory clearances, and other customary closing conditions, the deal is expected to close in the fourth quarter of 2010.

The deal is yet another acquisition check written by IBM, which has been in spending mode for more than a year. As recently as mid-August, IBM purchased marketing solutions provider Unica for $480 million. The recent flood of acquisitions follows a May 12 announcement made by IBM President and Chief Executive Officer Sam Palmisano that his company had earmarked $20 billion for acquisitions through 2015. At the time, IBM had already gobbled up Initiate SystemsSPSS, and Cast Iron Solutions, among others. 

[Editors' Note: Click on the following links for CRM magazine's coverage of the acquisitions of UnicaSterling CommerceCoremetrics, Initiate Systems, SPSSCast Iron Solutions, and Datacap.]

"This [acquisition] really accelerates our business analytics efforts," said Arvind Krishna, general manager of IBM's Software Group's Information Management business, during a joint teleconference. "Studies by IBM have revealed that 83 percent of chief investment officers have identified analytics as a top priority. These opportunities are what play to the combined strength of IBM and Netezza at a time when organizations of all sizes are looking to gain more insight."

Forrester Research Analyst James Kobielus says he considers this purchase a "must" for IBM, adding that analysts at Forrester had "long expected" Netezza to be acquired by a large data management company.

"[Netezza] has rapidly evolved into one of the major vendors serving enterprise and midmarket [data warehouse] customers," Kobielus writes in a blogpost about the deal. "We expect IBM to rapidly position Netezza's offerings, under its [IBM Smart Analytics System] big top, as its principal data-mart accelerators for both large enterprises and the midmarket."

Allan B. Krans, senior analyst at Techhnology Business Research, says he considers Netezza a significantly more mature business in the data warehousing appliance marketplace than DatAllegro and Greenplum, which were recently purchased by Microsoft and EMC, respectively.

"Managing, analyzing, and making decisions based on massive amounts of data is a process that is extremely well-suited for using pre-packaged and optimized appliances versus a pick and play combination of off the shelf [technology] products," Krans writes in a blogpost about the deal. "In a market increasingly dominated by large, diverse information technology vendors, the purchase of Netezza by IBM makes competitive sense for both companies. Netezza now has the development and distribution resources it needs to remain on par with Oracle, Microsoft, and EMC."

Kobielus views this acquisition as a clear shot at Oracle, a company he describes as "a common [IBM/Netezza] archrival...that is fielding an increasingly formidable appliance-based product portfolio, threatening both vendors' long-term positions in this dynamic market."

Analysts also cite Hewlett-Packard (HP) as a competitor that may suffer in the aftermath of the IBM-Netezza deal. Kobielus, for one, argues that HP could have acquired Netezza to jump-start itself back into the enterprise data warehouse appliance arena. Forrester analysts expect HP to make a play for "one of the remaining, well-established data warehouse appliance vendors, with Teradata the most likely and Vertica also a strong contender," Kobielus writes.

Analytics is clearly a priority for IBM. The company has more than 6,000 consultants dedicated to analytics, and in the last four years has invested more than $12 billion in 23 analytics-related acquisitions. In its second quarter of 2010, IBM's analytics business grew 14 percent. The addition of Netezza's client base — representing more than 350 customers — will only help accelerate that growth, IBM executives say.


News relevant to the customer relationship management industry is posted several times a day on destinationCRM.com, in addition to the news section Insight that appears every month in the pages of CRM magazine.

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