IBM buys Sterling Commerce from AT&T for $1.4 billion

IBM buys Sterling Commerce from AT&T for $1.4 billion

Summary: IBM bought Sterling Commerce from AT&T for $1.4 billion. Big Blue said it will lump Sterling Commerce and its 2,500 employees in with its WebSphere middleware unit.

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IBM on Monday acquired Sterling Commerce from AT&T for $1.4 billion. Big Blue said it will lump Sterling Commerce and its 2,500 employees in with its WebSphere middleware unit.

The move means that Sterling Commerce has another home inside of a large company. Sterling Commerce, which provides business-to-business supply chain, integration and fulfillment software, was acquired by SBC Communications in 2000 for $3.9 billion. SBC later acquired AT&T in 2005 and took its name. As a unit in AT&T, Sterling Communications continued to make selective acquisitions to round out its e-business portfolio.

According to a statement, IBM will use Sterling Commerce's business to create more supplier automation tools for customers via on-premise applications or cloud computing. IBM CEO Sam Palmisano said two weeks ago that the company would spend about $20 billion on acquisitions through 2015.

Sterling Commerce has more than 18,000 global customers and primarily focuses on transactions for financial services, retail, manufacturing, communications and distribution companies. IBM said it plans to expand Sterling Commerce's footprint in other verticals such as health care.

The deal is expected to close in the second half of the year. AT&T will get a pre-tax gain of $750 million.

Topics: E-Commerce, Banking, Browser, Enterprise Software, IBM, Software, AT&T

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3 comments
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  • RE: IBM buys Sterling Commerce from AT&T for $1.4 billion

    Why would AT&T show a $750 Million gain? After what SBC paid for it, it looks more like a $2.5 Billion loss to me.
    ShortyStuff
  • RE: IBM buys Sterling Commerce from AT&T for $1.4 billion

    ShortyStuff - Without knowing the specifics, what's probably going on here is "goodwill impairment". Roughly, goodwill is the difference between the purchase price of an acquisition and the value of its assets. When the company you buy owns software, the acquisition price can be nearly all goodwill. Under the old (GAAP) rules goodwill was depreciated like a piece of equipment, which was clearly wrong. Today, goodwill is written down if it is "impaired", meaning the acquisition is not as profitable as expected.

    Just guessing again, SBC/ATT probably overpaid in 2000. Sterling's bread & butter then was EDI (electronic data interchange) software. In the late nineties, the big-3 car companies linked arms & demanded that suppliers (thousands of companies) communicate electronically. After Y2K, software sales tanked. A lot of goodwill in the tech sector was impaired and written down. Did that happen here? I don't know for a fact, but it would explain how ATT can post a $750mm gain while losing a couple billion bucks.
    Geosota
  • RE: IBM buys Sterling Commerce from AT&T for $1.4 billion

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