IBM to buy Rational Software

IBM has agreed to acquire Rational Software Corp. for US$2.1 billion, the companies said last Friday.

Rational, which is located in Cupertino, California, provides software tools and services for developing business applications and other products, such as embedded software for cell phones, medical systems and other devices, the companies said in a joint statement.

The acquisition will allow IBM in Armonk, New York, to provide a software development environment for companies that want to integrate their business processes and software infrastructure across their operations, including suppliers and customers, the companies said.

Ninety-eight of the Fortune 100 companies, including IBM, already use Rational's tools, according to the statement.

IBM already offers close integration with a wide variety of Rational's software products. The IBM WebSphere tools, built on the company's Eclipse open-source platform, provide a single portal-like interface that gives software developers access to a wide range of tools from other software vendors, including those made by Rational.

Once the acquisition is completed, IBM plans to sell Rational's application development software through the Rational sales force, which will incorporate into IBM's own sales team, the companies said. In addition, IBM intends to integrate Rational's products more tightly with its own software offerings, they said.

Launched last year, the Eclipse project is managed by a consortium of vendors that includes Borland Software Corp., Fujitsu Software Corp., Red Hat Inc. and Sybase Inc. in addition to Rational.

The Rational purchase follows a series of announcements this year in which IBM moved towards consolidating its range of development tools onto a single infrastructure with the Eclipse platform as a foundation and comes amidst predictions that the market for application development tools will be a bright spot in an otherwise dull technology market, according to industry watchers.

A report released by IDC predicted growth of 11.5 percent annually through 2006 in the market for application development and deployment.

That market will be driven, among other things, by the emergence of Web services and XML (Extensible Markup Language) enabled tools that make older application development tools obsolete, according to a report released by IDC.

Rational will join other software purchases including Tivoli and Lotus as a new brand and new division of IBM's Software Group.

Rational co-founder and CEO Mike Devlin will serve as general manager of the division, reporting to IBM Senior Vice President and Software Group executive Steve Mills, IBM said.

IBM and Rational anticipate closing the deal in the first quarter of 2003, they said.

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