Cognos makes software that analyses businesses by combing through vast amounts of data.

The price offered by IBM is a 9.5 per cent premium over Cognos'' US closing share price of $52.98 on the Nasdaq.

IBM said the all-cash deal is subject to shareholder approval and is expected to close in the first quarter of 2008.

Cognos brings in a lot of synergy for Big Blue. IBM can integrate Cognos with its focus on information integration and content and data management. Cognos, which is built on a services oriented architecture, also plays well with IBM''s SOA strategy.

Cognos CEO Rob Ashe will lead IBM''s information management software division. Ashe will report to General Manager Ambuj Goyal.

Cognos has a few interesting business intelligence applications on the drawing board, notably better plug-ins with Excel and an array of Web 2.0 modules.

The acquisition of Cognos accelerates IBM''s global Information on Demand initiative. IBM will provide broader reach for Cognos solutions across multiple industries and geographies with a more complete set of offerings, including consulting services, hardware, and other middleware software.

Cognos provides the only complete BI and performance management platform, fully integrated on an open-standards-based service oriented architecture (SOA), and has a strong history of supporting heterogeneous application environments, consistent with IBM''s approach.

With Cognos, customers can turn data into actionable insight for coordinated, information-driven decision-making to improve overall performance. Cognos will also extend IBM''s reach further into the CFO office with powerful financial planning and consolidation capabilities, IBM said in a statement.

Cognos, the 23rd IBM acquisition in support of its Information on Demand strategy, will help the company deliver a broader set of business solutions across organisations, beyond the traditional users of business intelligence, IBM said.