IBM buys Rational for $2bn
IBM buys Rational for $2bn
IBM set its hooks deeper into the software market with the purchase of Rational Software for $US2.1 billion in cash – its biggest software acquisition since purchasing Lotus in 1995.
In a statement, IBM said Rational would form a fifth division within IBM's software group, joining its DB2 database, office productivity suite Lotus, storage management tool Tivoli, and Internet commerce platform WebSphere. IBM claims it will be able to integrate customers' data management, systems management, collaboration, transaction and business process integration middleware and software development environment as a result of the acquisition.
Rational was created in 1981 to write communications programs for the US Department of Defence and develops business applications and tools such as embedded software for devices such as cell phones and medical systems. The acquisition of development tools maker Rational is expected to extend IBM's "on-demand" strategy, announced in late October. The plan calls for an increased focus on technology that can integrate business software that was never designed to work together, and software that can automatically fix system problems.
Marketing manager and spokesperson from Rational Software in Australia, Mark McLaughlin said Rational's Australian customers have been generally "positive" about the news. Without naming specific companies, Mr McLaughlin said: "Our customers have been generally customers, particularly our larger customers have said they think it's a good thing." Local customers include the Western Australian Department of Transport, IBA Health and Health Insurance Commission.
IBM said it plans to retain most of Rational's 3,400 employees and its headquarters' locations in Massachusetts and California, as well as offices in Canada and labs in France and elsewhere. Rational employs approximately 150 staff in the local operation.
Once the acquisition is completed, IBM plans to sell Rational's application development software through the Rational sales force, which will incorporate into IBM's own sales team, the companies said. In addition, IBM intends to integrate Rational's products more tightly with its own software offerings, it said.
Senior vice president and group executive Software Group at IBM, Steve Mills, said: "Rational supports what IBM does best, which is provide infrastructure software and software tools to help our customers create a complete software development environment. This deal extends IBM's ability to help customers into the 'on demand' future with tools built on industry standards to develop, integrate and manage their business processes."
The division will be headed by Rational's current chief executive and co-founder Michael Devlin, who will report to Mr Mills.
Mr Devlin said: "The combination of Rational and IBM is a logical extension to what has been a very beneficial, 20-year relationship and will significantly extend our progress in key markets and customer segments."
IBM agreed to pay $US10.50 per share for Rational, about 28 per cent more than Rational’s listed share price at the time the deal was announced. IBM paid $3.5 billion for Lotus.
IBM and Rational shares see sawed after the announcement, with IBM dropping 74 cents to $82.32 while Rational jumped 26 per cent, or $2.12, to $10.29 with more than 100 million shares changing hands.
IBM said the deal should close in the first quarter of 2003, pending regulatory approval.
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