UPDATE: IBM Buys Varicent Software To Boost Business Analytics

International Business Machines Corp. (IBM) agreed to acquire Varicent Software Inc. as the computing giant continues its push into business analytics and other high-margin businesses.

Terms of the deal, which is expected to close in the second quarter, weren't disclosed.

Varicent, a private company founded in 2003, provides software that analyzes compensation and sales performance. Its clients include more than 180 banks, insurance companies and retailers, which use the software to better determine compensation, facilitate territory assignments and manage quotas.

The deal comes amid IBM's push to expand into complex, high-margin areas such as the business-analytics business, which mines data for insight, as it edges away from crowded fields where price competition can be steep.

Revenue from IBM's business-analytics segment grew 16% in 2011, and the company has expanded aggressively in the segment through research and development and its acquisitions of Algorithmics, Clarity Systems and Open Pages, among others.

IBM has said it expects revenue from its business-analytics segment to reach $16 billion by 2015, as its software businesses account for a growing portion of the bottom line.

Varicent's software will be combined with IBM's other offerings delivered through cloud computing or on site. IBM said it sees an opportunity for more businesses to apply advanced analytics to front-line operations, including sales, customer service and marketing.

"For the thousands of sales organizations still relying on silos of data, spreadsheets and e-mail to manage sales, there is an enormous opportunity to apply analytics to this vital area of business and uncover new, untapped growth opportunities," said Les Rechan, general manager of business analytics at IBM.

All of Varicent's employees are expected to join IBM's software group.

Shares were down $1.76 to $203.56 in recent trading. The stock is up 11% so far this year.

-By Kristin Jones, Dow Jones Newswires; 212-416-2208; [e-mail]