Oracle to buy Cambridge software firm ATG for $1b
Giant business software maker Oracle Corp. will pay $1 billion to acquire Art Technology Group Inc. of Cambridge, a major producer of the software used by retailers to power their online sales.
Art Technology Group, better known as ATG, "will now have the dedicated resources and broad distribution networks of the largest enterprise software company in the world," said Bob Burke, the company's chief executive, during a conference call yesterday.
Oracle will pay $6 a share for ATG, a 46 percent premium over the company's closing share price on Monday, when the acquisition deal was revealed. It is the latest in a wave of acquisitions in which little-known, but valuable Massachusetts companies are bought by out-of-state technology giants looking to boost their competitive profiles.
"Massachusetts has been a source of great start-ups," said Gene Alvarez, an e-commerce analyst for Gartner Inc. in Stamford, Conn. Oracle and other companies look to Boston, Cambridge, and the Route 128 area for specialized technology firms that can let them quickly expand their product lines, he said.
ATG provides e-commerce software to about 1,000 customers, including giant firms like AT&T Inc. and retailers such as Best Buy Inc. and J.C. Penney Company Inc. Oracle will get a company with e-commerce technology that allows shoppers to buy goods via desktop computers, mobile devices, telephone call centers, and even traditional brick-and-mortar retailers.
"This is an area that Oracle has not been able to address," said Brian Walker, a principal analyst for Forrester Research in Cambridge.
Walker said that Oracle can combine ATG's products with its existing customer relationship management and business planning software. "For many in the industry, we have seen this as a natural pairing," Walker said.
Founded in 1991 by two graduates of the Massachusetts Institute of Technology, ATG began as a designer of Internet cafes and high-tech museum exhibits. As consumer use of the Internet caught on, ATG began to produce software to let businesses sell their products and services online. At the height of the Internet boom of the late 1990s, few companies flew higher. Revenue jumped from $32 million in 1999 to $163 million in 2000, while the stock price hit $122 a share.
ATG was lucky to survive the ensuing collapse in the fortunes of Internet companies that began in 2000. Its share price plummeted, and revenues declined for four years in a row. But the company continued to upgrade its product line, confident that online selling would rebound.
"They stuck to their knitting," said Alvarez. "The improvements they made as an e-commerce provider were actually an advantage to them when e-commerce started to return."
Last year, ATG earned net income of $16.8 million, or 13 cents a share, on revenue of $179.4 million.
Oracle makes database and business management software for the world's largest businesses and government agencies. For the three months ending in August of 2010, Oracle posted revenue of $7.5 billion and net income of $1.35 billion, or 30 cents a share.
ATG joins a long list of Boston-area technology firms recently snapped up by industry titans. IBM Corp. alone has purchased four local companies so far this year; the biggest of its deals was last month's $1.7 billion acquisition of data storage firm Netezza Corp.
In July, Google Inc. agreed to pay $700 million to acquire ITA Software Inc. of Cambridge, which makes online reservation software for the travel industry. Earlier this year, Oracle paid $685 million for Phase Forward Inc. of Waltham, a maker of data management products for pharmaceutical companies. Last November, Hewlett-Packard Co. bought Marlborough data networking company 3Com Corp. for $2.7 billion, and in October 2009, Cisco Systems Inc. paid $2.9 billion for Starent Networks Corp., a maker of data networking gear for cellular phone systems.