IBM to Pay $1.7 Billion for Data Specialist Netezza

IBM said Monday that it would buy data analytics company Netezzafor $1.7 billion to expand its business of helping clients analyze market information.


The move comes as IBM is shifting its focus from increasingly commoditized computer hardware to higher-margin software and services, particularly analytics, which help clients analyze market data to plot trends or prevent fraud.

The deal values Netezza at $27 per share, a 9.8 percent premium from Friday's closing price of $24.60. The stock rose about 12 percent in morning trading.

Marlborough, Massachusetts-based Netezza sells appliances that combine analytical software and hardware to clients like online dating site eHarmony and financial exchange operator NYSE Euronext.

For example, Netezza's technology helps eHarmonycomb through massive data from user profiles and Web traffic to figure out who might be a good match for a particular user.

IBM said the speed of Netezza's technology had convinced it to buy the company. The two are currently partners, with Netezza using IBM hardware.

"Speed is critical," said Arvind Krishna, general manager of information management at IBM. "Clients don't have the patience to wait for weeks."

He said analytics, which accounted for about $9 billion of IBM's $95.76 billion in revenue last year, was a significant growth opportunity for the company.

IBM said in May that it planned to spend about $20 billion in acquisitions through 2015 to expand its software and services business.

Its top rivals include Hewlett-Packard , Oracle and Cisco Systems , all of which have announced new services and acquisitions in an effort to offer a broader set of technology services to clients.

IBM employs 6,000 analytics consultants. Netezza has 500 employees.

The companies said they expected the deal to close in the fourth quarter. The merger agreement includes a termination fee of $56 million, according to a regulatory filing.

Shares of IBM were up about 1 percent.