Connecting Some Dots on IBM’s Acquisition of Unica – 08/16/10

AUG 16

Last week, IBM announced the acquisition of the legacy marketing automation vendor Unica.  This is a surprising move when you consider the $480 million price tag for the no-growth $110m revenue mostly licensed software vendor stagnant at $10m of EBITDA.  IBM’s purchase equates to about 4.4x revenue, 48x EBITDA, and a 120% premium to the previous days closing stock price.  This valuation is a good benchmark for public CRM vendors who have struggled to grow (salesforce.com excluded).

On a stand-alone basis Unica gives IBM a platform for CRM marketing where it has historically not been a strong player.  When you consider some of IBM’s more recent acquisition we can see the Unica purchase is part of something greater, a new ‘e-commerce strategy’ that aligns IBM for competition against web presence and analytics leader Adobe/Omniture.  Earlier this year IBM acquired Sterling Commerce for B2B e-commerce and back office billing/payment fulfillment (for $1.4 Billion) and CoreMetrics for marketing analytics. If IBM intends to build out a complete e-commerce platform under the IBM Websphere banner, Unica will fulfill a large portion the B2C marketing automation function.  Other areas where IBM may look to expand its functionality include email and deeper marketing content capabilities.

IBM’s strategy is likely to provide customers with a more complete suite of tools to manage online transactions, relationships, web presence, and content. Typical of IBM, it has decided to build out this roadmap through acquisition. Sterling Commerce will serve as the B2B e-commerce engine for relationship management with Unica providing the customer facing lead / campaign management, and CoreMetrics providing the measurement and reporting around marketing activities.

When you consider the resources that IBM is committing to this new e-commerce strategy, it positions IBM to challenge web presence leaders like Adobe. IBM has stated it will spend $20 Billion over the next few years on technology to bolster its higher margin software offerings.   Let us know what you think.

Have a great week!

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Michael Boardman