IBM to Acquire SPSS Inc. to Provide Clients Predictive Analytics Capabilities

ARMONK, N.Y. and CHICAGO .- IBM (NYSE: IBM) and SPSS Inc. (Nasdaq: SPSS) today announced that the two companies have entered into a definitive merger agreement for IBM to acquire SPSS, a publicly-held company headquartered in Chicago, in an all cash transaction at a price of $50/share, resulting in a total cash consideration in the merger of approximately $1.2 billion. The acquisition is subject to SPSS shareholder approval, applicable regulatory clearances and other customary closing conditions. It is expected to close later in the second half of 2009.

This acquisition is expected to further expand IBM’s Information on Demand (IOD) software portfolio and business analytics capabilities, including the range of offerings available through IBM’s recently-announced Business Analytics and Optimization Consulting organization and network of Analytics Solution Centers. The acquisition is also expected to strengthen IBM’s Information Agenda initiative, which helps companies turn information into a strategic asset.

As companies attempt to control costs and use resources more wisely, IDC estimates that the worldwide market for business analytics software will swell to $25 billion this year, growing 4% over 2008.(1)

IBM is expanding its focus on business analytics technology and services to meet growing client needs to cut costs, reduce risk, and increase profitability through predictive analytics capabilities, which include advanced data capture, data mining and statistical analysis. These capabilities help organizations analyze trends and patterns found in historical and current data to drive new forms of competitive advantage by predicting potential future outcomes and optimizing all elements of their businesses, including product and service offerings for customers.

Helping Clients Forecast Future Trends

The ability to forecast future trends and spot shifts in consumer patterns or behavior even before they occur can give businesses a competitive advantage in today’s economy.

“With this acquisition, we are extending our capabilities around a new level of analytics that not only provides clients with greater insight -- but true foresight,” said Ambuj Goyal, general manager, Information Management. “Predictive analytics can help clients move beyond the ’sense and respond’ mode, which can leave blind spots for strategic information in today’s fast paced environment -- to ’predict and act’ for improved business outcomes.”

The acquisition of SPSS will add a wide array of advanced analytic capabilities to IBM’s IOD software portfolio enabling many new industry-focused solutions including: customer acquisition and retention for financial services, patient care improvement for the healthcare industry, crime prevention for public sector and ideal store location for retailers and manufacturers. In addition, software capabilities that address all industries will include demand forecasting, employee hiring and retention, customer profitability, credit scoring and fraud detection. All of these new offerings will help clients drive better business outcomes within their specific industries.

Predictive Analytics in Action

Predictive analytics technology can also be used to help reduce credit risk, increase customer loyalty and detect and prevent fraud -- across diverse industries including finance, telecommunications, retail and government. With the combined SPSS technology and IBM software and consulting capabilities, clients will be able to identify which customers to target, how to reach them, when to make contact and the most appropriate action to take.

For example, the recognition of patterns, based on intelligent, timely analysis of the thousands of incident reports, crime tips, and other data that police departments receive every day, is critical to fighting crime and protecting the public. Police services often use predictive analytics to identify and predict patterns of criminal behavior to help forecast which minor crimes are most likely to escalate into violence. By investigating dispatch data, the police can also create models that pinpoint crime “hot spots,” so they can place tactical units where they anticipate crime is most likely to occur. The Richmond, VA police department provided the results of this kind of predictive analysis to detectives and saw a 20-30 percent decrease in violent crime and homicides in a 12-month period. This technology has also been used in political campaigns to zero in on likely voters to determine what campaign messages have the greatest impact on undecided voters.

With this type of technology, Internet merchants now know exactly which products customers are browsing and buying -- in real-time. Search engines are now instantly mining information between customer queries and clickthroughs as the data flows in to determine which products are in the most demand at a given time. These advances are also allowing retailers to use data in new ways. With insight into future buying trends, retailers can address customer needs in a highly personalized manner. If a customer purchases a specific seasonal product, the retailers can instantly give the online shopper options on additional items that he or she may also like to purchase as seasons change.

Consistent with IBM’s software strategy, IBM will continue to support and enhance SPSS technologies while allowing customers to take advantage of the broader IBM portfolio.

Following the close of the acquisition, IBM intends to integrate SPSS within IBM’s Information Management software portfolio and into the many industry offerings already available. Predictive analytics will also be an essential component of the smarter business systems that IBM is helping companies and organizations build to help confront the complex challenges presented by the exponential growth of data.