IBM Wants to Buy Netezza for $1.7 Billion

Published: September 21, 2010

by Alex Woodie

IBM yesterday announced plans to buy Netezza, a developer of pre-configured business intelligence appliances that has become quite popular over the past several years. IBM agreed to buy all shares of the publicly traded company for $1.7 billion, or $27 per share, representing a 10 percent premium over the stock's closing price on Friday.

Over the last couple years, Netezza has generated a significant amount of mindshare (if not marketshare) in the area of business intelligence and data warehousing. Every data integration vendor seemed to want to feed data into the dedicated TwinFin appliances that Netezza packaged and sold atop IBM BladeCenter using the PostgreSQL database. The capability to ramp up very large data warehouses very quickly, and the speedy performance of its SQL-based queries, is what separates Netezza from software-based data warehousing offerings, according to proponents of the company and its technique.

The IBM offer validates that technique in "bringing analytics to the masses," says Steve Mills, senior vice president and group executive of the newly formed IBM Software and Systems Group.

"Netezza is a perfect example of this approach … [of] bringing together optimized hardware and software, in response to increasing demand for technology that delivers true business value," Mills says in a press release. "Netezza strongly complements our business analytics capabilities and client base. Together, we have the opportunity to quickly leverage the technology and accelerate the offering."

Having gone public in 2007, the Marlborough, Massachusetts-based company expanded at a 50 percent rate until 2009, when total revenues grew less than 2 percent, to $191 million. That did not help Netezza's stock, which languished below the $15 range for the last two years. However, two related events in the last month helped to push Netezza's stock upward: a rosy revenue forecast for fiscal 2011, and rumors of an acquisition, including possibly by IBM.

Netezza shareholders enjoyed a 70 percent increase in stock value in just the last three weeks. The boost provided by the acquisition announcement was small potatoes compared to the speculation fueled by the forecast and the rumors. In fact, the company's stock is trading about 75 cents above the agreed-upon IBM acquisition amount, signifying that some shareholders are anticipating a bidding war to take place over Netezza.

Netezza has 350 customers, including eHarmony, Neiman Marcus, Time Warner, Estee Lauder, Blue Cross Blue Shield of Massachusetts, United HealthGroup, Nationwide Insurance, Sapporo, NYSE Euronext, and Virgin Media.

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