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Volume 19, Number 29 -- August 16, 2010

Unica Snapped Up By Big Blue for $480 Million

Published: August 16, 2010

by Timothy Prickett Morgan

If you thought that IBM was not in the application software business, you are wrong. It is just not in the ERP and related software businesses, but Big Blue most certainly is interested in boosting its software portfolio and therefore its revenues and profits. And to that end, IBM last week snapped up another software company in the e-commerce space, called Unica, for a stunning $480 million.

Unica is a public company that specializes in interactive marketing, something that Big Blue itself sure could use a little help with--particularly when it comes to the AS/400 iSeries System i Power Systems-i platform. Unica's eponymous suite of marketing software manages targeted, personalized marketing campaigns; the products are also available as an on-demand service for those who don't want to install and support the software themselves. Unica's three co-founders--Yuchun Lee, Ruby Kennedy, and David Cheung--were all undergraduates at the Massachusetts Institute of Technology and they founded their company in 1992. Lee was still chief executive officer and chairman of Unica when IBM bought it. Unica has over 1,500 customers using its marketing management software, including Best Buy, eBay, ING, Monster, Starwood, and U.S. Cellular.

IBM plans to integrate its various InfoSphere, Cognos, and SPSS data analytics software, its Sterling Commerce, Coremetrics, and WebSphere e-commerce software, and Unica's marketing management software to take marketing one step further and start to do predictive analysis for future marketing campaigns. Sources at IBM reckon that the enterprise marketing management field represents a $2.5 billion market opportunity for Big Blue, and one that it currently doesn't play in.

In its latest fiscal year, ended in September 2009, Unica posted sales of $100.6 million, down 16.9 percent, and its loss widened to $21.8 million, from a loss of $9.7 million on $121.1 million in sales in fiscal 2008. The company was profitable when it was smaller back in 2005, but its growth has come at the cost of diminished profits. Unica had $43.1 million in cash and equivalents when it exited the June quarter, and its sales were up 14.3 percent to $30.7 million and it reported at profit of $1.2 million, compared to a loss of $292,000 in the year-ago quarter.

Clearly Unica will benefit from tighter integration with IBM's data warehousing, analytics, and e-commerce software. And IBM will have one more arrow in its software quiver with which it can take shots at Oracle, SAP, and Microsoft.

IBM expects for the Unica acquisition to close in the fourth quarter. The 500 employees of Unica will be merged into IBM's Systems and Software Group (the merger of IBM's Software Group and its System & Technology Group). Specifically, Unica will be added to the Business Analytics and Optimization Consulting organization, which has 5,000 consultants and engineers and which has done $11 billion of acquisitions in the past five years.


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