IBM to Acquire DemandTec - Analyst Blog
December 09 2011 - 6:45AM
Zacks
International Business Machines Corp. (IBM) has
agreed to acquire DemandTec Inc. (DMAN), a
cloud-based analytics solutions provider, for an estimated $440
million. This would be IBM’s fourth acquisition in a span of 3
months. The proposed acquisition will enhance and strengthen IBM’s
Smarter Commerce initiatives. In an all cash transaction, IBM will
be paying $13.20 per share for the acquisition.
DemandTec Inc., based in San Mateo, California, provides
software that analyzes consumer buying patterns and helps retailers
to ascertain the best price and product mix. In the process,
DemandTec’s software helps companies to increase revenues and
profits. The company boasts more than 450 retailers as its clients,
which include grocery, drug, convenience, consumer electronics,
office supplies, apparel, department stores, and quick-serve
restaurants. Well known companies like Best Buy Co.
Inc. (BBY), Target Corp. (TGT), and
Wal-Mart Stores Inc. (WMT) are
all part of its list of elite clients. Moreover, the company has 31
patents in fields of pricing, response analysis and promotion
analysis.
IBM is making every possible move to incorporate cloud-based
services in the Smarter Commerce segment to help its clients get a
better understanding of the market dynamics and remain profitable
through quick and effective business decisions. IBM expects the
Smart Commerce initiative to yield $20.0 billion in software by
2015. The acquisition of DemandTec would be incrementally positive
for IBM, as the latter has a huge client base and it logs a
cloud-based annual sales figure of $82.4 million.
With $20 billion to spend till 2015 on acquisitions, we expect
IBM to continue with its strategy to acquire companies, which it
deems necessary to achieve its 2015 goals.
The competitive landscape in cloud computing is heating up, with
the technology bellwethers making several acquisitions to gain
traction in the market. One such hot deal is Oracle
Inc. (ORCL) acquiring RightNow Technologies
Inc. (RNOW) for $1.5 billion. Oracle will likely integrate
RightNow's software into its own portfolio of online offerings,
which include programs for managing sales and marketing and human
resources.
More recently it was reported that Oracle Inc. and SAP
AG (SAP) were gearing up to acquire California-based
cloud-computing software company SuccessFactors
Inc. (SFSF). However, Oracle had to make way for SAP, as
the latter finally acquired SuccessFactors for $3.4 billion.
Nonetheless, IBM remains a heavyweight in the cloud computing
market and its strong cash balance enables IBM to acquire companies
with high intellectual property that can drive further growth for
the company.
IBM is experiencing strong revenue growth across all
geographical regions, coupled with robust growth in emerging
markets worldwide. IBM expects these growing markets to drive
revenues and increase growth in 2011 and beyond.
We have a long-term Neutral recommendation on IBM. Nonetheless,
we are optimistic about its strong fundamentals and robust growth
prospects going forward. We therefore have a Zacks #2 Rank for IBM,
which translates into a short-term ‘Buy’ rating.
BEST BUY (BBY): Free Stock Analysis Report
DEMANDTEC INC (DMAN): Free Stock Analysis Report
INTL BUS MACH (IBM): Free Stock Analysis Report
ORACLE CORP (ORCL): Free Stock Analysis Report
RIGHTNOW TECH (RNOW): Free Stock Analysis Report
SAP AG ADR (SAP): Free Stock Analysis Report
SUCCESSFACTORS (SFSF): Free Stock Analysis Report
TARGET CORP (TGT): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis Report
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