IBM said it will acquire DemandTec, a cloud based company focused on pricing, merchandising and marketing analytics, for $440 million. DemandTec will give IBM a larger software-as-a-service footprint in retail and brings customers such as Target and FreshDirect to the table.
That price works out to $13.20 a share. DemandTec closed at $8.43 a share on Wednesday. DemandTec is expected to report $91.4 million in revenue for the fiscal year ending Feb. 28, 2012, according to Thomson Reuters estimates. The company is also expected to report a loss for the fiscal year, but is close to break even.
For Big Blue, the DemandTec purchase represents another pillar in its smarter commerce effort and another software as a service play. IBM has bet big on two key areas mobile and e-commerce. DemandTec falls in the latter category and focuses on retailers and consumer product companies.
IBM's DemandTec purchase also highlights the run on software-as-a-service companies. SAP bought SuccessFactors and Oracle acquired RightNow. However, IBM software and systems chief Steve Mills has noted that the company's acquisition approach is different. In a nutshell, IBM is more about targeting verticals with its purchases while others are looking for more big bang deals.
For instance, DemandTec wasn't highlighted as a SaaS play that would be in great demand. IBM manages to find the acquisitions that fly under the popular radar.
DemandTec's applications allow companies to outline buying scenarios across multiple channels and even look at weather patterns and how they may affect shopping. The idea is that these scenarios will enable retailers and other companies to better gauge consumer demand and drive sales.
DemandTec has 350 employees with offices in Minneapolis, London, Paris and Bangalore. The deal is expected to close in the first quarter.