IBM acquires cloud software firm DemandTec for $440-mn

International Business Machines (IBM) yesterday said that it is buying price-management software company, DemandTec Inc, for $440 million in cash to expand its range of cloub service offerings.

The Armonk, New York-based computer giant is paying $13.20 per share, a 57-per cent premium to DemandTec's closing stock price of $8.43 on 7 December.

The acquisition is IBM's biggest since it purchased analytics-technology provider Netezza Corp in September last year for $1.7 billion in cash (See: IBM to buy data storage firm Netezza for $1.7 bn).

The hefty 57-per cent premium IBM is paying reveals the importance of cloud-based software companies. Last week, German business software firm SAP AG proposed to pay a 52-per cent premium for human resources software company SuccessFactors Inc (See: SAP to buy Success Factors for $3.4 bn), while in October Oracle acquired online customer service company RightNow Technologies for $1.43 billion, giving the cloud technology company its highest-ever valuation (See: Oracle to acquire cloud-based customer service firm RightNow for $1.5 bn).

IBM said that the acquisition of DemandTec will extend its Smarter Commerce initiative by adding cloud-based price, promotion and other merchandising and marketing analytics to help companies better define the best price points and product mix based on customer buying trends.

DemandTec, based in San Mateo, California, delivers cloud-based analytics software that enables businesses to examine different customer buying scenarios, both online and in-store. As a result, companies can spot trends and shopper insights to make better price, promotion, and assortment decisions that increase revenue and profitability.

IBM said that by gaining a quick and accurate analysis of consumer trends, for example, a retailer can predict how consumers will respond to a price change before making that critical decision. A brand manager can adjust the marketing mix for a product to better drive sales in the grocery channel. A merchant and supplier can work together to understand how one shopper segment differs from another to craft the best merchandising plan.