News

Acquisitions by IBM and Veritas in flat software market

• By Rich Seeley
• July 16, 2004

Like second-place baseball teams looking to acquire .300 hitters, software vendors, in what continues to be a difficult business environment, are seeking to gain a competitive edge through acquisitions.

This week IBM, which reported flat second quarter earnings in its software business on Thursday, announced the acquisition of privately held Alphablox Corp. to boost its Software Group's business intelligence (BI) offerings.

Alphablox software is designed to embed analytics, such as sales trends, into enterprise business process management applications, the announcement explained. Financial details for the purchase of Mountain View, Calif.-based Alphablox were not released, but IBM said the sale is expected to be completed in about a month. Alphablox's operations will be integrated into IBM's Information Management software business and Alphablox products will soon be available from IBM and its business partners, according to the IBM announcement.

At the same time, IBM disclosed that despite healthy hikes in overall second quarter sales and profits, software revenues were essentially flat during the period. Overall second quarter earnings rose 15% to just under $2 billion on sales up 7% to $23.2 billion. IBM officials said revenue from the combined WebSphere, DB2, Rational, Tivoli and Lotus software products totaled $2.7 billion, the same as the second quarter of 2003. Operating systems revenues declined 2% to $577 million.

In other acquisition news this week, Veritas Software Corp., Mountain View, Calif., announced that it is buying Invio Software, a privately held Los Altos, Calif.-based supplier of IT process automation technology, for $35 million in cash.

Veritas plans to add Invio's process automation technology to its utility computing product line, according to a statement by Mark Bregman, Veritas executive vice president of product operations.

Veritas was another company on a Gartner list of those reporting disappointing or lackluster earnings in the second quarter. Others on the list included BMC Software, Computer Associates, FileNet, PeopleSoft, Siebel Systems and webMethods.

"Recent earnings warnings from vendors confirm Gartner's predictions that software markets won't return to robust growth till 2006," stated Joanne Correia, vice president and lead analyst of Gartner's software industry research unit.