Another day another analytics acquisition for IBM. This time it is DemandTec, a SaaS house that provides marketing, pricing and merchandising optimization and analytics primarily for the retail sector – basically it helps business adjust their promotions based on analysis of buying behavior. IBM is offering $440m ($13.30 per share), and assuming all goes to plan the deal is expected to close in Q1 2012.
The company bolsters IBM’s growing SaaS and analytics portfolios. Other analytics acquisitions have included data warehouse appliance and software provider Netezza (see Netezza under offer from IBM), Algorithmics (see IBM acquires in analytics…again) a specialist in risk management from the financial sector, and i2 (see IBM snaps up intelligence analytics specialist i2) which deploys analytics to help government, insurance and retail customers assess security threats. Then there is Unica and Coremetrics. DemandTec also unites the analytics/commerce software segments - IBM’s also has analytics and commerce provider Sterling Commerce, in its portfolio. These are just some of its more recent acquisitions – there is no douting the seriousness of it intentions.
With declared interests in cloud and analytics, IBM is moving forward rapidly and making extensive use of its $20bn acquisition fund. Its acquisitions are characterized by three features - SaaS, analytics, and vertical markets - with acquisitions providing one or more of these features. That’s a smart approach and one that will keep it away from immediate competition with software vendors looking to buy for market share or customer base. It should help keep purchases prices in check too, although the DemandTec offer is 57% above the pre-offer closing price.
DemandTec, whose c450 customers are primarily in the US with the UK as its next largest market, is another of those SaaS companies who has yet to make a profit. It posted losses of $13.7m, $11.8m, and $5.0m in fiscal 2011, 2010 and 2009, respectively. Revenue from fiscal 2011 was $82.4m, a modest 4.3% increase on the previous year. SaaS pure-plays have yet to prove they can deliver any/consistent profitability, DemandTec is another example of that.