Entries Tagged 'M&A' ↓

At the time of Autonomy’s Q2 results last week, a fair few commentators said an acquisition of Open Text was imminent. We know that a large deal is imminent and the enterprise value of Open Text (OTEX) is in Autonomy’s ball park. Plus OTEX – itself a roll-up machine somewhat akin to Autonomy –  isn’t exactly in the rudest of health right now.

On the earnings calls CEO Mike Lynch said Autonomy’s next major acquisition would not be done to buy growth (we have already expressed our thoughts on that), nor would it be done simply because the price is right. It would have to be a strategic move, a game-changer. Well, OTEX isn’t that, in our mind at least. So what would such a deal give Autonomy?

Sure, it would give it practically all the document management business in the legal sector. But so what? Autonomy already has a lot of that via its Interwoven acquisition. It would also bring with it yet more overlapping content management products and a collaboration business being eaten by SharePoint. On the plus side, it would roughly triple Autonomy’s customer base to about 65,000 organizations.

Of course, I could be completely wrong and August 18 could be the date on which that is proved, as it’s OTEX’s Q4 results announcement. That is, if SAP hasn’t got there first.

Still, Tibco or Informatica make far more sense to us as truly strategic acquisitions for Autonomy. But of course, in order to buy something you have to find a willing seller, and we’re not so certain those sorts of companies relish the prospect of ending up inside Autonomy as much as a company that has few other choices might do.

SAP faces a number of challenges to make the most of its proposed $5.8bn acquisition of Sybase, not the least of which being that the company’s core enterprise applications do not currently run on Sybase’s database software.

As we suggested last week that should be pretty easy to fix technically, but even if SAP gets its applications, BI software and data warehousing products up and running on Sybase ASE and IQ in short-order, it still faces a challenge to persuade the estimated two-third of SAP users that run on an Oracle database to deploy Sybase for new workloads, let alone migrate existing deployments.

Even if SAP were to bundle ASE and IQ at highly competitive rates (which we expect it to do) it will have a hard time convincing die-hard Oracle users to give up on their investments in Oracle database administration skills and tools. As Hasso Plattner noted yesterday, “they do not want to risk what they already have.”

Hasso was talking about the migration from disk-based to in-memory databases, and that is clearly SAP’s long-term goal, but even if we “assume for a minute that it really works” as Hasso advised, they is going to be a long-term period where SAP’s customers are going to remain on disk-based databases, and SAP is going to need to move at least some of those to Sybase to prove the wisdom of the acquisition.

A solution may have appeared today from an unlikely source, with IBM’s release of DB2 SQL Skin for Sybase ASE, a new feature for its DB2 database product that provides compatibility with applications developed for Sybase’s Adaptive Server Enterprise (ASE) database. Most Sybase applications should be able to run on DB2 unchanged, according to the companies, while users are also able to retain their Sybase database tools, as well as their administration skills.

That may not sound like particularly good news for SAP or Sybase, but the underlying technology could be an answer to its problems. DB2 SQL Skin for Sybase ASE was developed with ANTs Software and is based on its ANTs Compatibility Server (ACS).

ACS is not specific to DB2. It is designed to is designed to support the API language of an application written for one database and translate to the language of the new database – and ANTs maintains that re-purposing the technology to support other databases is a matter of metadata changes. In fact the first version of ACS, released in 2008, targeted migration from Sybase to Oracle databases.

Sybase should be pretty familiar with ANTs. In 2008 it licensed components of the company’s ANTs Data Server (ADS) real-time database product (now FourJ’s Genero db), while also entering into a partnership agreement to create a version of ACS that would enable migrations from Microsoft’s SQL Server to Sybase Adaptive Server Enterprise and Sybase IQ (451 Group coverage).

That agreement was put on hold when ANTs’ IBM opportunity arose, and while ANTs is likely to have its hands full dealing with IBM migration projects, we would not be surprised to see Sybase reviving its interest in a version that targets Oracle.

It might not reduce the time it takes to port SAP to Sybase – it would take time to create a version of ACS for Oracle-Sybase migrations (DB2 SQL Skin for Sybase was in development and testing for most of 2009) – but it would potentially enable SAP to deploy Sybase databases for new workloads without asking its users to retool and re-train.

The 451 Group has published its take on the proposed acquisition of Sybase by SAP. The full report provides details on the deal, valuation and timing, as well as assessing the rationale and competitive impact in three core areas: data management, mobility, and applications.

As a taster, here’s an excerpt from our view of the deal from a database perspective:

The acquisition of Sybase significantly expands SAP’s interests in database technology, and the improved ability of the vendor to provide customers with an alternative to rival Oracle’s database products is, alongside mobile computing, a significant driver for the deal. Oracle and SAP have long been rivals in the enterprise application space, but Oracle’s dominance in the database market has enabled it to wield significant influence over SAP accounts. For instance, Oracle claims to be the most popular database for deploying SAP, and that two-thirds of all SAP customers run on Oracle Database. Buying a database platform of its own will enable SAP to break any perceived dependence on its rival, although this is very much a long-term play: Sybase’s database business is tiny compared to Oracle, which reported revenue from new licenses for database and middleware products of $1.2bn in the third quarter alone.

The long-term acquisition focus is on the potential for in-memory database technology, which has been a pet project for SAP cofounder and supervisory board chairman Hasso Plattner for some time. As the performance of systems hardware has improved, it is now possible to run more enterprise workloads in memory, rather than on disk. By using in-memory database technology, SAP is aiming to improve the performance of its transactional applications and BI software while also hoping to leapfrog rival Oracle, which has its disk-based database installed base to protect. Sybase also has a disk-based database installed base, but has been actively exploring in-memory database technology, and SAP can arguably afford to be much more aggressive about a long-term in-memory vision since its reliance on that installed base is much less than Sybase’s or Oracle’s.

SAP has already delivered columnar in-memory database technology to market via its Business Warehouse Accelerator (BWA) hardware-based acceleration engine and the SAP BusinessObjects Explorer data-exploration tool. Sybase has also delivered in-memory database technology for its transactional ASE database with the release of version 15.5 earlier this year. By acquiring Sybase, SAP has effectively delivered on Plattner’s vision of in-memory databases for both analytical and transaction processing, albeit with two different products. At this stage, it appears that SAP’s in-memory functionality will quickly be applied to the IQ analytic database while ASE will retain its own in-memory database features. Over time, expect R&D to focus on delivering column-based in-memory database technology for both operational and analytic workloads.

In addition, SAP touted the applicability of its in-memory database technology to Sybase’s complex-event-processing (CEP) technology and Risk Analytics Platform (RAP). Sybase was already planning to replicate the success of RAP in other verticals following its acquisition of CEP vendor Aleri in February, and we would expect SAP to accelerate that.

Meanwhile, SAP intends to continue to support databases from other vendors. In the short term, this will be a necessity since SAP’s application software does not currently run on Sybase’s databases. Technically, this should be easy to overcome, although clearly it will take time, and we would expect SAP to encourage its application and BI customers to move to Sybase ASE and IQ for new deployments in the long term. One of the first SAP products we would expect to see ported to Sybase IQ is the NetWeaver Business Warehouse (BW) model-driven data-warehouse environment. SAP’s own MaxDB is currently the default database for BW, although it enables deployment to Oracle, IBM DB2, Microsoft SQL Server, MaxDB, Teradata and Hewlett-Packard’s Neoview. Expect IQ to be added to that list sooner rather than later, and to potentially replace MaxDB as the default database.

I have some views on how SAP could accelerate the migration of its technology and users to Sybase’s databases but – for reasons that will become apparent – they will have to wait until next week.

Newssift, which was set up by the FT Search unit within the Financial Times and launched in March 2009 was shut down recently after just a few months in full operation. We looked  at it from time and time and obviously looked at it closely at launch time, talked to the executive in charge of it (who also appears to have left the FT) and to most of the vendors that supplied the technology – namely Endeca, Lexalytics, Nstein and Reel Two.

But the fact that people like us only looked at it from time was indicative of the problems the site apparently had. According to a source at one of the technology suppliers, the site was sticky once people had stayed around on it for the first time, but  those new users were hard to come by and those that didn’t persist that first time didn’t find a reason to come back.

But Newssift’s loss is a bit of a blow to those in the text analysis industry, as it was supposed to be a flagship application of the technology, brought to market by one of the pre-eminent publishers in the world. That combination apparently wasn’t enough to make it succeed.

The thing that reminded us to look at it was yesterday’s acquisition of Nstein technologies by fellow Canadian content management player (and roll-up machine) Open Text for $35m, which seems to be a case primarily of Open Text consolidating its industry as long as it can get a good price, rather than being a deal for customers or technology.

We probably should have been using Newssift daily rather than relying on M&A to jog our memory as to its existence. But we weren’t, and now it’s gone .

There is news that EMC has a new partnership with FatWire Software for WCM.  There are a few components to this deal, as we understand it:

• EMC will resell FatWire Content Server in a new package called EMC Web Experience Management by FatWire.
• EMC will have rights to resell the whole FatWire portfolio.
• EMC has made an undisclosed equity investment in FatWire.
• FatWire will resell the EMC DAM product.
• FatWire will develop apps on Documentum xCP.

It’s a substantial partnership and an admission that EMC’s own efforts in WCM weren’t cutting it with customers.  Still, it falls short of the rumored acquisition.  Why?  The two vendors claim a partnership gives EMC access to high-end WCM technology while letting FatWire remain nimble enough to develop products quickly and be more responsive to market needs — the equity investment is meant to help FatWire along these lines.  This makes some sense as acquired WCM often gets lost in a larger ECM vendor.  But with the market consolidation that has already occurred in this sector, EMC is taking on some risk relying on a third-party for its WCM rather than owning it outright.

Apparently it’s a risk EMC is willing to take, which we take to mean that WCM isn’t seen as strategic enough to EMC to do the acquisition.  That’s not all that surprising really.  WCM is as much (if not more) a part of marketing automation these days as it is part of the sorts of ECM apps EMC is invested in.  Buying WCM at this point would mean making some commitment to continued innovation in areas of online marketing (e.g., multivariate testing, web analytics etc.) that don’t relate much to other areas of EMC’s business.  EMC is focusing on its core transactional document management apps and information governance opportunities that tie records management to archiving and e-discovery.  WCM doesn’t really have much to do with any of that.

FatWire’s products will essentially replace EMC’s WCM assets (though EMC hasn’t yet announced specific products or timelines for end-of-life, but that will come) and so this is potentially a boon to FatWire’s sales, insomuch as EMC can sell FatWire’s software.  If this partnership does have a material impact on FatWire’s sales, it could impact its ability to be acquired by another vendor, at least at a valuation it might want.  So this could be a big deal for FatWire, one way or another.

In case you hadn’t heard, we’ve just acquired the Uptime Insititute to boost our already substantial presence in the world of data center operators, their customers and their suppliers. The release is here and there’s some reaction here, here, and here. Onwards and upwards!

Now that the deal between Microsoft and Yahoo is done, it got me thinking more about Yahoo and it’s position as a pioneer of the web. That it was one is not in doubt; its directory was indeed a first and useful. But how much else did it actually pioneer? Have a look at a list of Yahoo’s acquisitions.

• Search – surely the cornerstone of the business, yet its very first search engine was licensed from Open Text in 1995. Sure, it went on to build its own and do some great work, but now with the deal done with Microsoft, Yahoo has exited the search business.
• Webmail – I recall getting a great Yahoo email address when that came out in 1997; it was a pioneer, but it got there by purchasing Four11.com and its RocketMail service . Now my account is overrun with spam and unusable (yet the company has the temerity to regularly threaten to cut me off for having too much mail and not using it enough, all of which is spam that its own spam filters can’t control. Hmmm.)
• Personal publishing – it was an early major player in personal publishing now called blogging, but again it got there largely by purchasing GeoCities for an enormous amount of Yahoo stock.
• Advertising – it pioneered banner ads on the web but as we all know but caught out by keyword search innovation from Google (which it built, rather than bought). And it had to buy Overture from Idealab.
• Rich media – the Broadcast.com deal unleashed Mark Cuban on an unsuspecting world.
• Photos – to its credit and bought Flickr and then largely left it alone
• Social bookmarking – same goes for De.licio.us

But if the rest that can be said for it is that Yahoo knew when to leave its acquired companies alone, to give them space to grow and continue innovating then all that’s left is a dwindling brand and company with some choice assets left intact for others to pick up over time. As this article pointed out recently, many of these acquired assets have been closed down, some only after a few years.

There is still innovation happening within Yahoo, plenty of it and I wish the folks at Yahoo working in the labs on some great semantic technology, among other things the best of luck. But touting a new home page just last week doesn’t give me much hope that Yahoo really gets the distributed, read/write Web. Who cares about home pages?

And of course Yahoo isn’t going anywhere soon, it has plenty of cash in the bank and a new revenue stream courtesy of Microsoft. But I doubt it will last out the 10 years of this deal.

One of things all this demonstrates is that M&A is different in different parts of the tech industry. In enterprise software quite often a company is buying a customer base and its ongoing maintenance stream – this is how Oracle has grown. But on the web with people not paying you directly and with very low (to nil) switching costs to another search engine, serving up a different set of ads, things are very different and you have to focus on core competences, not run after each new fad just as it’s peaking and buy your way into it.

Quick thoughts on the deal. We will have a full report for clients tonight. This is mainly thoughts about the text analytics part and I haven’t had a chance to speak with either company at the time of writing, so bear that in mind.

• This is long-predicted, by us and many others. I recall a chat with SAS founder and CEO Jim Goodnight a couple of years ago and he said it me – and I’m slightly paraphrasing –  in so many words, “why doesn’t IBM just buy them, I don’t understand why they haven’t already?” Well IBM finally has, or at least has made the initial move. And for $50 per share or almost $1.2bn.
• Of course like almost every IBM deal in recent years, the two are partners, IBM signed an OEM deal for the SPSS’ PASW statistics software in Q2 and has had other deals with it going back many years.
• IBM has text anlaytics tools, of course but they really are just that; tools. It is not a major player in text analytics applications at this juncture. The vast majority of its engagements tend to be very large, custom-based ones and are still few and far between, as far as we can gather, mostly in financial services and telecommunications.
• SPSS, on the other hand has tools, workbenches and applications and has found  some hot spots in this area, including analyzing customer feedback surveys, in particular the open-ended questions that can provide some of the richest material in such surveys but are often ignored because they’re too manual-intensive to analyze by hand.
• SAS Institute now has a much bigger analytics competitor. Goodnight didn’t rate SPSS much as a competitor, but IBM? That’s a bit different.
• SAP-Business Objects must be thinking of making a move too.

More considered thoughts from myself and my fellow 451 analysts later on today.

451 clients will be getting our fill report on this deal today, so I won’t be spilling all our thoughts on the deal (or all the details of the structure) here. But here’s a few initial thoughts on the news:

• The new entity will comprise a bigger threat against the many text analysis competitors recently acquired by much larger companies, notably Teragram by SAS, ClearForest by Reuters and Inxight by Business Objects (and subsequently by SAP), as well as SPSS, which got into this business via acquisition back in 2003.
• Such deals aren’t usually done from a position of dominance and it’s fair to say that Attensity wasn’t growing as fast as it used to be. They’re driven in part by investors who either want a payout now or see the potential for one by adding heft to a company and thus getting some economies of scale.
• Attensity remains in the voice of the customer business, but adds a few more, including customer self-service.
• CEO Ian Bonner and CTO Ian Hersey are back together almost two years since selling Inxight.
• Hersey now has a major software integration job on his hands for the next couple of years.

So Autonomy has closed the acquisition of Interwoven and released a few details of its product plans. We’ll be hearing more in detail from senior management in the next couple of weeks, but a couple of things jump out at you when  you peruse that document.

Firstly the usual, magical IDOL integration has happened again. What Autonomy is calling iManage Universal Search, is of course very similar in name to Interwoven’s Universal Search, which was powered by Interwoven’s agreement with Vivisimo.  Now, just like that! – Vivisimo has been swapped out for IDOL. That’s not surprising of course, as everything Autonomy does is based on IDOL.

But the speed of integration seems unlike anything else we see in the industry and leaves us scratching our heads as to how this can actually happen so quickly, especially as we don’t believe IDOL to be a very lightweight, REST-like interface or anything like that.

Secondly, it looks as if the various product names within Interwoven – iManage, Discovery Mining, TeamSite and so on will be retained, while the company name disappears.

But, as I say, we’ll hear more soon and will report back in the form of a research update on Autonomy.