Intelligent Enterprise

Outward Bound

Sybase acquires NEON to expand its e-business portfolio

In Brief

E-commerce transaction solutions provider Peregrine Systems Inc. has agreed to acquire B2B integration vendor Extricity Inc. in a stock-for-stock exchange valued at about $168 million. Crystal clear: Seagate Software Inc. has changed its name to Crystal Decisions in an effort to leverage its Crystal brand of business intelligence products. Crystal Decisions will continue to be owned by its parent company, Seagate Technology LLC, which recently converted to private ownership. Nine airlines and three aerospace firms have formed Cordiem LLC, an aviation B2B exchange and application services provider, in the hopes of streamlining the $500 billion aviation supply chain market. I2 Technologies Inc., IBM, and Ariba Inc. are among Cordiem's technology partners. Novell has obtained a new CEO through its acquisition of Cambridge Technology Partners Inc. in a transaction worth close to $266 million. Cambridge president and CEO Jack Messman will replace Eric Schmidt as Novell's CEO. Schmidt will continue to serve as Novell's chairman and chief strategist. Growing clusters: Oracle and Compaq Computer Corp. have announced a partnership to deliver scalable, clustered computer configurations based on the Oracle9i Real Application Clusters and Compaq TruCluster Server technologies.

Business isn't all bad in the enterprise integration sector - even in an economic downturn. In February 2001, infrastructure management company Peregrine Systems Inc. announced its acquisition of integration vendor Extricity Inc. Then Sybase announced it would acquire integration middleware vendor New Era of Networks Inc. (NEON) in a $373 million stock-for-stock trade. Although the acquisition may have been unexpected, it is a logical move for the billion-dollar company, which has been expanding its business from its core technology - databases and development tools - into the e-business infrastructure software space.

Sybase introduced its enterprise portal product last year and recently released its latest version, Sybase EP 2.0. Clearly, the NEON acquisition fills a gap in Sybase's infrastructure offerings. "We decided that in our goal of becoming a top three e-business provider, it was a strategic move to actually buy that [integration] piece and bring it into our stack. We chose NEON because it was a very good product fit with our current technology," said Marty Beard, vice president of corporate business development at Sybase.

Steve Hendrick, vice president of application development and deployment at International Data Corp. (IDC), agrees: "I think it's a good move for Sybase. It adds capabilities that are relevant in today's world. The need for infrastructure and integration will be there for a very long time."

All of NEON's products and Sybase's EAServer application server and portal product will move into Sybase's new e-business division, which will report directly to CEO John Chen. "NEON products will be integrated into Sybase in August," said Hendrick. "NEON's corporate name will be retired, but the product names will be maintained within the division because of [their] brand recognition and value."

Another benefit to acquiring NEON is its strong partnership with IBM, which embeds NEON's product in its MQSeries Integrator. A significant amount of NEON's revenue is from IBM - "by far and away our biggest channel partner," said Colin Osborne, chief marketing officer of NEON. "We are committed to keeping that relationship going."

Will NEON's acquisition affect its relationship with IBM? According to Beard, the acquisition strengthens the partnership: "IBM is more comfortable because the battle is moving toward more large, end-to-end platform providers." Beard does acknowledge that Sybase will have some go-to-market conflicts with IBM, but he is confident that they can be worked out. Clearly, Sybase wants to maintain the relationship that NEON established.

Hendrick believes that the acquisition will have little effect on IBM: "IBM has a very well established e-business platform strategy. It is well positioned to meet customer needs regardless of where NEON fits into the equation. Over the longer term, IBM's probably not concerned with what happens to the relationship."

However, according to Bob Mick, vice president of strategic consulting at ARC Advisory Group, "IBM is pursuing a J2EE-Enterprise JavaBeans strategy and this move may mean less and less NEON involvement over time.... The odds are that the net effect of the Sybase acquisition will be to weaken the commercial relationship with IBM and an eventual separation on technology as well."

Nowadays, coopetition is business as usual. Sybase has discovered that the "not invented here" syndrome is a handicap for e-business solutions providers. You can certainly expect to see more integration vendor acquisitions before 2002.

Chuleenan Svetvilas