IBM to Buy FileNet

IBM, which has been rapidly beefing up its already large software operations, made its third acquisition in as many weeks, agreeing on Thursday to buy FileNet for $1.6 billion, or $35 a share.

IBM paid a very small premium for the content management company, which closed the evening before at $34.65. Last year, FileNet posted a profit of about $40 million, or 99 cents a share, on sales of $421.8 million.

In recent trading, shares of FileNet were up 78 cents, or 2.3%, to $35.43; IBM was gaining 49 cents to $75.88.

Content management has become a major focus of large businesses, struggling to manage ever-growing streams of data in documents, emails, Web pages and more. Last year, the market for content management software totaled $3.2 billion and it is expected to grow by an additional 13% this year, according to IDC, a market research organization.

Storage giant EMC leads the highly fragmented market, followed by FileNet, IBM and Microsoft.

The acquisition was not a major surprise; there had been rumors for some time that FileNet or one of the other players would be snapped up by a larger organization seeking to expand its share of the market.

This is the third-largest software acquisition for IBM. Its largest was Lotus in 1997 for $3.5 billion, followed by its purchase of Rational for $2.1 billion in 2003.

Earlier this month, IBM acquired privately held Webify Solutions, which sells middleware that makes it easier to develop applications for financial services and other specific industries. Last week, Big Blue purchased MRO Software for about $740 Million in cash, or $25.80 a share. MRO sells software and services to help businesses manage, purchase and maintain and retire equipment and facilities.