IBM (NYSE: IBM) on Monday said it had reached an agreement to acquire Netezza (NYSE: NZ), a publicly traded firm specializing in business analytics, for roughly $1.68 billion in an all-cash deal.
For Big Blue, the acquisition will expand its business intelligence and analytics offerings, extending to clients an easy-to-deploy solution that can glean sharp insights into massive stockpiles of unstructured data.
"IBM is bringing analytics to the masses," Steve Mills, senior vice president and group executive of IBM's Software and Systems division, said in a statement.
At its core, IBM's acquisition of Netezza comes in response to the demand from enterprise clients for sharper business intelligence and analytics tools that has turned information-management software, including database management systems, into a brisk growth industry.
In a research note, Stifel Nicolaus analyst Aaron Rakers projected that "spending on overall information management software will continue to outpace overall IT spending growth trends over the coming years."
"With an appetite for enhancements in real-time/dynamic analytics to allow enterprises to make quality business decisions faster, we expect an ongoing integration of these functionalities into purpose-built converged appliances/platforms," Rakers said.
The Netezza acquisition vaults IBM into more direct competition with Oracle (NASDAQ: ORCL), which offers a similar solution with its Exadata product. Teradata (NYSE: TDC) and Greenplum, which is in the process of being acquired by EMC (NYSE: EMC), are also principal rivals of Netezza.
For Netezza, which already bases its product portfolio on IBM's hardware, a key selling point for enterprises is the ease of deployment. The company boasts that clients can be up and running with high-performance analytics queries within days of deploying its technology. Moreover, Netezza boasts that its solution carries only minimal barriers to entry, offering nontechnical workers access to deep business insights without extensive administrative support.
"Together, with the power of IBM solutions and services, we'll be able to create business solutions with appliance-level simplicity, incredible return on investment for those customers that actually help them change fundamentally the way they do business," Netezza President and CEO Jim Baum said in a video announcing the acquisition.
Netezza currently holds a client portfolio of more than 350 companies in an array of industries, including BlueCross BlueShield, Time Warner and eHarmony.
IBM intends to fold Netezza into its Information and Management software suite, padding out its Business Analytics and Organization Consulting group. Over the past four years, IBM has shelled out more than $12 billion to acquire 23 firms offering analytics products and technology. The company now dispatches more than 6,000 dedicated consultants to assist clients with the deployment of its analytics and BI software to help make sense of the proliferation of business data.
"Building on this challenge of analytics, and the growing need for it in enterprises, the next big shift will be about ease of use, simplicity and providing lower costs," said Arvind Krishna, general manager of information management at IBM's Software Group. "Analytics is going mainstream, and we are making this a reality for our clients."
IBM's bid of $27 per share represented a roughly 10 percent premium over Netezza's price at the close of business on Friday. Shares were up nearly 13 percent in early trading on Monday.
The transaction is subject to a regulatory review and approval from Netezza shareholders. IBM expects the deal to close in the fourth quarter of this year.