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A key part of the growth strategy at IBM (NYSE: IBM) is to buy up top-notch software companies. So, today the tech giant has struck again; that is, agreeing to purchase SPSS (NASDAQ: SPSS) for about $1.2 billion in cash.
Founded in the late 1960s, SPSS saw an opportunity to find ways to use software to turn raw data into information for decision making. Yes, in today's world, this sounds kind of basic. But 40 years ago, it was certainly pioneering.
Now, SPSS is a leading provider of so-called predictive analytics software, which has wide applications like patient care, crime prevention, customer acquisition, demand forecasting, fraud detection, and so on. Such things are crucial for companies to remain competitive in the global economy, especially in light of the economic instability.
As for the financials, SPSS is solid. The company has a diverse revenue base across industries and countries. Last year, SPSS posted $302.9 million in revenues with $64.7 million in cash flows.
Of course, by being a part of IBM, there should be some nice growth opportunities. For example, the IBM Global Services divisions can sell SPSS solutions as part of client engagements. Keep in mind that -- according to IDC -- the global market for business analytics software is expected to grow to $25 billion this year.
So far in today's trading, the shares of SPSS are up 40% to $49.15.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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