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IBM ponies up $1.7bn for data warehouse maker

Your move, NEC or Dell

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If Japanese server maker NEC wanted to build a dataware housing business based on Netezza's database and field programmable gate array accelerators, then it is going to shell out a couple billion dollars. Because server rival IBM just bought Netezza for $1.7bn, fleshing out its data warehousing and analytics portfolio as it gears up to do battle with Teradata, Oracle and Microsoft.

As El Reg has previously reported, Netezza has seen explosive growth in its recent quarters. Revenues were up 45 per cent in the second quarter ended July 31, to $63.8m, with $3.2m in profits. The company would be instantly more profitable as part of Big Blue since Netezza pays IBM for the BladeCenter blades servers that are the hardware in which the software and FPGAs that make up the TwinFin appliances run.

Two weeks ago, there was speculation that Netezza was an acquisition target, and on 8 September, when the rumors hit, Netezza's stock rose by 12.6 per cent to just a little over $24 apiece, giving Netezza a market capitalization of $1.32bn. Both Dell and IBM were mentioned by wagging tongues as potential suitors for Netezza. IBM because it likes hardware acceleration and Dell because it does not have a data warehousing business to speak of and it needs to get into software.

IBM is offering $27 a share for Netezza, which works out to $1.7bn net after taking out the $66.6m in cash the publicly traded company has in the bank. Considering the revenues and profits Netezza has, most people looking at Netezza would think that even the $1.32bn valuation on the company was excessive, but given the justifications that Wall Street makes for public companies, we pegged the asking price at between $1.6bn to $1.7bn. And if Dell or NEC decides to make a counterbid, it could go higher.

Netezza has 350 customers and will be tucked up into IBM's newly created Systems and Software Group, managed by senior vice president Steve Mills. IBM will be talking about the acquisition later today and expects it to close in the fourth quarter.

One of the things that Steve Baum, Netezza's president and CEO, has said Netezza needed - and one of the reasons why Netezza partnered with NEC - was that it needed to take a channel approach to augment its direct sales model.

IBM has over 6,000 consultants dedicated to data analytics, which dwarfs Netezza's 470-strong employee base. Clearly, IBM thinks it can rapidly ramp up Netezza's sales. ®

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