Netezza’s bogeyman

When Microsoft gets into a new market, the impact on the existing vendors tends to be in line with the software giant’s gargantuan size. After all, fears among startups over getting ‘Netscape-d’ have often been realized. That’s particularly true in the days before the convicted monopolist started putting on a softer face on its business. Gone are the days when Microsoft would threaten ‘to cut off the air supply’ of other companies, as it famously did to the Internet browser pioneer. Maybe it’s middle-aged softness at the 33-year-old company, but Microsoft’s bite often seems a little toothless these days. (Does anyone really think Microsoft – with or without spending $45bn on Yahoo – will be able to narrow the gap to Google in search advertising?)

Still, there was a moment last week when it appeared the Redmond, Wash.-based behemoth once again looked like it had the power to scare the bejesus out of a company (and its investors) by buying its way into a market. Last Thursday, as it was holding its annual meeting with Wall Street, Microsoft said it was purchasing Datallegro, a data-warehousing startup that we estimate was running at about $35m in sales. A market source indicated that rumors of the deal started percolating late Wednesday, a day before official word of the acquisition. Almost immediately, shares of data-warehousing vendor Netezza came under pressure. After hitting an intra-day high of $13.36 on Wednesday, Netezza stock slumped as much as 8% and closed basically at the low of the day. It opened even lower Thursday and sunk the entire day, finishing the session at $11.48. From its peak to its trough in those two sessions, Netezza lost 14%, with trading on Thursday about 50% busier than average.

However, as easy as it may be to point to Microsoft’s competitive move as the reason for Netezza’s decline, the two events are linked only by coincidence rather than causality. According to two market sources, Netezza actually distributed shares back to its VCs, meaning the stock’s slump can be attributed to the supply side, rather than demand side. (There have been no SEC filings about the move, and calls to the company to verify the information weren’t immediately returned.) Maybe Microsoft isn’t the big, bad company we all thought it was?