IBM Corp. announced it agreed to buy Swedish software firm Telelogic for $745 million in cash to raise its profile as a leading software provider to major companies. Telelogic counts numerous wireless businesses, including L.M. Ericsson, Motorola Inc. and Samsung Electronics Co. Ltd., among its customers.
Armonk, N.Y.-based IBM will pay a 21% premium above Telelogic’s closing price on May 31, when market speculation first began that the company had become a takeover target, said the Malmo, Sweden-based firm.
Telelogic is a leading provider of software to the aerospace, telecom and auto industries that allows companies to build and test software systems for aircraft radar and anti-lock braking systems. The company, which has more than 1,100 employees in 22 countries worldwide, reported revenue of $206 million last year.
“They are a very strong presence in the market,” said Kristof Kloeckner, vice president, strategy and technology at IBM’s software group.
IBM said it will integrate Telelogic into its Rational Software division, which specializes in helping companies make more efficient software systems. IBM first created the unit in 2002, when it acquired Rational Software Inc. for $2.1 billion.
“IBM is clearly transforming itself into a software company, which we believe is underappreciated by many investors who continue to view the company primarily as a hardware vendor,” said Deutsche Bank analyst Chris Whitmore, in a May research report.
Big Blue has been building up its software holdings. Last week, it acquired Waltham, Mass.-based Watchfire Corp., a closely held maker of security and compliance testing software. Watchfire will also become part of Rational Software.
The Telelogic board has approved the deal, however regulatory and shareholder approval is still required.
David Jones is a reporter for Crain’s New York Business, a sister publication to RCR Wireless News. Both publications are owned by Crain Communications Inc.
