International Business Machines (IBM - Analyst Report) recently announced that it has completed the acquisition of privately-held business analytics software provider Star Analytics for an undisclosed amount. The acquisition will expand IBM’s growing analytics product portfolio over the long term.
Redwood City, Calif-based Star Analytics offers products that easily extract relevant financial data from big data and integrates reporting and business intelligence tools both in the cloud and on-premise. This reduces time consumption, thereby allowing faster decision making. Moreover, Star Analytics software helps to effectively address automation headwinds between hybrid computing environments and different applications.
Apart from being a long-time IBM partner, Star Analytics also works with Oracle (ORCL - Analyst Report) relational database management system (“RDBMS”) and Microsoft’s (MSFT - Analyst Report) SQL server. Star Analytics cloud products run on major platforms including Oracle on Demand, Microsoft Azure and Amazon Web Services.
The Star Analytics product portfolio will form a part of IBM’s financial performance management unit under the analytics group. The latest acquisition complements IBM’s earlier business analytics takeovers of Varicent, Algorithmics, Clarity Systems, OpenPages and Cognos. IBM expects these acquisitions and ongoing investments in predictive analytics such as SPSS to expand its analytics product portfolio.
Business analytics is one of the four key long-term growth initiatives of IBM, in addition to cloud computing, smarter planet and growth markets. IBM expects business analytics to grow to a $20.0 billion business by 2015 and acquisitions are expected to be a major contributor. IBM acquired 11 companies in 2012 at an aggregate cost of $3.96 billion.
It is noteworthy that most of these acquired companies offer analytical products. Reportedly, IBM has spent $16.0 billion on 30 analytics acquisitions over the last five years (2007-2012). IBM plans to spend approximately $20.0 billion on acquisitions through 2015, which is expected to boost its top line by approximately 2.0%.
We expect IBM to continue to pursue strategic acquisitions that can be easily integrated into its current business, thereby expanding its product portfolio in higher-growth segments, such as smarter commerce, business analytics and security. The acquisitions will also help IBM to compete with the likes of Oracle and Microsoft in the near term.
However, volatile macro-economic environment, continued weakness in the domestic market and Euro zone, declining outsourcing signings and increasing competition from other outsourcing service providers such as Accenture (ACN - Analyst Report) are the major headwinds in the near term.
Currently, IBM has a Zacks Rank #3 (Hold).