IBM Acquires Coremetrics - Analyst Blog

International Business Machines Corp. (IBM) announced the completion of the acquisition of Coremetrics, a privately held company, based in San Mateo, California to expand its software and services business. Financial details of the acquisition were not disclosed. IBM had earlier announced its plans to acquire Coremetircs in June 2010.

Coremetrics is an Internet research company and a leader in web analytics software. It aids businesses in developing and managing their online marketing campaigns by providing real-time intelligence. The acquisition of Coremetrics’ technology will allow IBM to gauge the efficacy of their marketing techniques and better identify customers’ choice, behavior and shopping habits.

The deal will facilitate consumer interactions internally and through social media networks, enabling faster and effective marketing campaigns. This will also address the needs of customers for enhanced online sales and marketing.

IBM points out that the acquisition will augment its business analytics capabilities by enabling organizations to use a cloud-based delivery model, thereby boosting its service portfolio. The acquisition will enhance IBM’s competencies for delivering business analytics solution to be used with IBM WebSphere Commerce software.

Coremetrics will become part of IBM’s application and integration middleware portfolio. The combination of Coremetrics into its existing software and services portfolio consisting of WebSphere, information management and business analytics and optimization will help the company expand its product portfolio. 

With more than 200 employees and serving more than 2,100 global brands across a wide range of industries, Coremetrics’ important customers such as Bank of America Corp. (BAC), Holiday Inn 1-800 Flowers, Office Depot, Victoria’s Secret and Petco will be added to IBM’s portfolio. This will expand IBM’s customer base and ensure better growth prospects.

IBM will be in a better position to compete against Coremetrics’ prime competitors such as Omniture, which is a unit of Adobe Systems(ADBE), Unica Corp.(UNCA) and Webtrends among others. IBM said Coremetrics' 230 employees will join the company’s Software Group.

To expand its software business, IBM purchased PwC Consulting from PricewaterhouseCoopers in 2002. Since 2003, IBM had acquired a total of 55 software companies and plans to spend $20 billion on total acquisitions through 2015.

IBM’s shift to high margin services and software business and its growth initiatives such as smarter planet and industry frameworks, growth markets, business analytics and optimization and cloud computing have driven significant growth opportunities and generated high profit margins for the company. Increased acquisition will boost revenues for IBM for the year 2010.

Over the long term, we maintain a Neutral recommendation on the stock. Currently, IBM has a short-term Zacks rank of #3, indicating a Hold rating.
 
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