Sterling Software is to acquire Texas Instruments' software operation to create a $360 million application development business.
Texas Instruments, continuing a programme of divesting itself of non-core units, agreed today to sell TI Software to the fellow Dallas-based company for $165 million in cash. Once the deal is completed in about two months' time, Sterling will merge its new acquisition into its own application tools unit and both product lines are likely to be combined and jointly branded within a year, said one source.
The main motivations for Sterling seem to be to plug weaknesses in its own lifecycle product, Key - TI's tools are seen as being stronger at the implementation end and it is further advanced in the fashionable area of component development; and to broaden its geographic spread. "We will gain TI's 700 customers, and its channels will be of great benefit," said Sterling's UK marketing manager, Paul Francis. TI is also stronger in Europe, while Sterling's main base has been in the US.
The next few weeks will be spent addressing any product overlaps and deciding the future of staff and executives. Company spokespeople said the products are largely complementary and users should see "no significant disruption" but would not give further details.
As for personnel, TI Software's president, Bob McLendon, is likely to become president of the combined unit, reflecting the financial weight of the newcomer - TI Software made revenues of around $250 million last year, compared to $109.8 million for Sterling's development division.
In a joint statement, the companies said they expect to offer jobs to nearly all the TI Software employees. Terry Booth, UK head of TI Software, who admitted his own future and that of other executives was "uncertain", said he believed Sterling was serious about keeping as many other employees as possible. "Acquisitions normally fail because employees leave," he said. "Sterling is well aware of that."
Sterling had its own experience of a difficult acquisition when it bought Case vendor Knowledgeware. UK marketing manager Paul Francis admits that was a problematic merger but claims "we definitely learned a lot of lessons from that acquisition".
Some analysts see the acquisition of TI Software as a move to plug some of the weaknesses of the core lifecycle development product Sterling acquired with Knowledgeware, now renamed Key. According to the Gartner Group, Key and TI's Composer application toolset are "complementary more than overlapping", with Sterling stronger at the analysis end and TI in execution and implementation."
Booth agreed with this view: "We have some joint customers using Sterling for analysis and TI for code generation." Francis added: "The integration of these products should be of great benefit to Key, strengthening it particularly at the implementation end of the lifecycle."
"Texas Instruments Software is a pioneer and leader in component-based development, clearly themost advanced and fastest growing development technology," said Sterling president Sterling Williams in a statement. Texas Instruments' president Tom Engibous added: "With TI accelerating its focus on digital signal processing solutions, the time is right for TI Software to become part of a company that is equally focused on delivering products and services to the software industry."
Booth agreed: "It was nice to have a $10 billion benefactor but we were never part of the core business. We will now have better responsiveness to developments and better product planning."
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