IBM Buys Software Maker Lombardi

IBM laps up privately-held Lombardi in an attempt to boost its software strategy.
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ARMONK, New York (

TheStreet

) --

IBM

(IBM) - Get Report

is continuing on its software M&A tear, clinching a deal to purchase privately-held

Lombardi

early Wednesday.

Last month, IBM snapped up security software specialist

Guardium

in an attempt to bolster its

business analytics

strategy, a pact that followed a

$1.2 billion deal

for software maker

SPSS

and the purchase of

Exeros

.

Lombardi, based in Austin, Tex., makes software for streamlining product planning, human resources, procurement and supply chain management. The company lists

Capital One

(COF) - Get Report

,

Hasbro

(HAS) - Get Report

,

AFLAC

(AFL) - Get Report

and

T-Mobile

as customers. IBM is clearly looking to tap into a quickly growing market.

"Lombardi's software is designed to improve the management and integration of processes," said Craig Hayman, general manager of application and integration middleware at IBM, during a conference call Wednesday. "This is a space that's very exciting."

Technology research firm

IDC

estimates that the business integration software market will grow nearly 15% annually over the next four years, hitting $3 billion by 2013.

IBM has not disclosed the value of the Lombardi acquisition. Software is extremely high priority in Armonk. The company's software profit grew more than 20% during its recent third-quarter. IBM

CEO

Sam Palmisano

expects to generate $8 billion in software profits in fiscal 2009, up from $7.1 billion in 2008 and $2.8 billion in 2000.

With more than 90 acquisitions since 2003, IBM is clearly not afraid to open up its corporate coffers. Last year the firm bought business integration software companies

ILOG

,

InfoDyne

and

AptSoft

.

IBM, which is one of

TheStreet's

top tech

stocks for 2010, has undergone a metamorphosis in recent years. Once synonymous with servers and hulking high-end mainframes, the tech giant has

shifted

its focus toward higher-margin areas such as software and services.

Rival

Oracle

(ORCL) - Get Report

, however, has mounted a major challenge to IBM in

middleware

, a software technology that controls how different computer programs communicate with each other. With

Hewlett-Packard

(HPQ) - Get Report

also increasing its software and services efforts, it comes as no surprise that IBM is spending some of its $11.5 billion cash haul.

IBM plans to offer Lombardi's software as part of its own WebSphere family of middleware products, said Hayman. Big Blue will also work Lombardi's tech into its

'Smarter Planet'

strategy for boosting efficiency in areas such as transportation,

healthcare

and power grids.

Lombardi already partners with IBM for its WebSphere middleware. There is a large degree of crossover between the two firms, according to Lombardi CEO Rod Favaron.

The software specialist has about 300 large "enterprise class" customers using its flagship Teamworks product, explained the CEO. "A reasonably high percentage of these customers are shared," added Favaron. "They use Lombardi and part of the WebSphere product suite."

Shares of IBM, which expects to complete the Lombardi deal within the next 30 days, rose 78 cents, or 0.61%, to $129.27 Wednesday, mirroring the Nasdaq, which gained 0.6%.

-- Reported by James Rogers in New York

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