By
Tom Taulli
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July 18, 2007
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Sometimes, small deals can make a big difference. Just ask IBM (NYSE: IBM ) , which agreed this week to purchase DataMirror for $161 million. The deal should help boost Big Blue's efforts to achieve its vision of "information on demand."
DataMirror develops software that helps track and analyze corporate data. Unlike many of its rivals, the company's software acts in real time, a critical advantage for client companies such as FedEx (NYSE: FDX ) and Citigroup (NYSE: C ) . In addition, the software melds readily with numerous databases from firms such as Microsoft (Nasdaq: MSFT ) , Oracle (Nasdaq: ORCL ) , and Sybase (NYSE: SY ) . Both of these factors are essential for IBM's burgeoning Information Server technology, which helps organizations access needed information wherever it may reside.
DataMirror is selling out for a reasonable 3.5 times revenue, and though its 2,200 customers may seem somewhat paltry, they're not necessarily IBM 's main reason for the purchase. After all, both companies have been partners for more than a decade, and a healthy chunk of DataMirror's customer base has come from IBM referrals.
Because of the Information Server's complex requirement, IBM probably isn't done buying smaller firms to bulk up the platform's features. With the tech giant also hoping to derive 50% of its pre-tax profits from software by 2010, Foolish investors should expect more big-dollar deals from Big Blue over the next year.
Further Foolishness:
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Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. He is currently ranked 2,109 out of more than 60,000 total participants in CAPS.
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