IBM to acquire Cognos for $5 billion
In a move rumored for months, Big Blue to pay $5 billion in cash for the business intelligence company to fill out its information management portfolio.
IBM on Monday announced plans to buy business intelligence software company Cognos in a $5 billion all-cash transaction.
The acquisition, which was rumored for several months, continues IBM's strategy of acquiring companies to fill out its software portfolio and boost earnings growth.
Cognos, a public company based in Ottawa, Canada, provides tools for building business reports and business performance management dashboards.
The software will complement IBM's existing set of products for data warehousing and information management.
Cognos' existing products will "match nicely with (IBM's) middleware and software products," Steve Mills, senior vice president and group executive of IBM Software Group, said during a conference call Monday.
Mills said Cognos' employees and management staff will remain in Ottawa. The companies would not comment on whether layoffs were planned as a result of the deal.
Cognos President and CEO Rob Ashe would not comment on whether other companies bid for Cognos. He said the company was not for sale before this deal developed, however.
Ashe said there is virtually "no product overlap" between the two companies' product lineups.
This marks the 23rd acquisition IBM has made to further its "information on demand" strategy. The transaction, which works out to $58 per Cognos share, is expected to close in the second quarter of 2008 and provide shareholders a net value of $4.9 billion, IBM said.
The move accelerates consolidation that has already begun in the business intelligence area.
After a number of standalone business intelligence companies combined a few years ago, Oracle bought Hyperion for $3.3 billion earlier this year. And last month, SAP, in a deal valued at more than $6.8 billion.
A lot of money is at stake in the business intelligence market. AMR Research, for example, expects spending in the business intelligence and performance-management arena to reach $23.8 billion by the end of the year, reaching a level that would jump ahead over last year by 3.6 percent.
Cognos will become a group within IBM's Software division headed by Ashe.
Update: 10:26 a.m.: Analysts note that there a number of players in the business-intelligence market, but the IBM-Cognos announcement marks an end to the "big three."
"After the SAP-Business Objects announcement, Cognos sent a message to the analyst community that 'we are the last man standing, woo hoo.' It had a sound of desperation that the (SAP-Business Objects merger would be) a good thing for us," said Lee Geishecker, enterprise strategies vice president for AMR Research.
The consolidating industry may have little effect on customers, Geishecker noted.
"The majority of customers have a mix of solutions. Some may own Business Objects and Hyperion," Geishecker said. "So the mergers don't make their integration any easier; it just changes who they make the check out to."
Meanwhile, a number of the smaller business intelligence companies may seek to merge with companies that are similar in size, or smaller, to build up their critical mass. Geishecker, however, noted that a number of these smaller companies are niche players, and their ability to merge with others will depend on their product and customer mix.
Shares of Cognos rose 7.91 percent in morning trading to $57.17 a share. And IBM also received a lift of 3.09 percent to $103.35 a share. Shares of both companies rose on a morning when the broader markets were mixed.
News.com's Mike Ricciuti and Dawn Kawamoto contributed to this report.