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Compuware agrees to buy ailing Covisint

Compuware Corp. disclosed last week that it has agreed to buy the supplier management portals and data messaging services of Covisint Inc., an ailing online auto services company originally formed by Detroit's Big Three automakers. Compuware officials said they expect the deal to close within 30 days. Financial details were not disclosed.

"Compuware's financial stability, global presence, and mature services and development organizations will only enhance the value Covisint is able to deliver to the automotive industry," Compuware chairman and CEO Peter Karmanos Jr. said during a news conference. "This is an outstanding opportunity to gain synergy from extended relationships and enhanced technology."

Karmanos forecast that the Covisint messaging and portal services will generate more than $20 million for Compuware during the next fiscal year, and eventually grow into a $100 million business for the software supplier. "It gives us an entree into the health care, finance and retailing industries that are desperately in need of the same type of technology that the automotive industry felt it was necessary to build," he said.

He believes that the failure of Covisint to meet early expectations was not the result of bad management, per se, but flaws in the online auctions concept itself. "What they misjudged was the level of distrust that suppliers may have had for the auction business," he said.

Karmanos added that Compuware would be taking on the majority of Covisint's staff -- 100 of the company's 120 employees, including CEO Bob Paul, who was appointed to his position in June. Those employees will move to Compuware's Detroit headquarters, he said.

The Southfield, Mich.-based Covisint was established in 1999 as an online auto parts and information exchange, cooperatively funded by General Motors, Ford Motor Co. and DaimlerChrylser, and later by Renault and Nissan. Commerce One and Oracle Corp. were the venture's two lead technology partners. Commerce One provided front- and back-end auction technology and catalog content to power Covisint. Oracle contributed enterprise resource planning applications to run its internal operations and its Exchange Marketplace to provide security, single sign-on and registration capabilities.

Covisint was created at the height of the tech boom and amid optimistic predictions for the future of online exchanges. At its birth, the automakers predicted Covisint would broker the sale of $240 billion worth of parts every year, generating $5 billion in revenue.

But those numbers never materialized, and in December Covisint revealed plans to sell off its auction services business to supply management software and services provider FreeMarkets. (Pittsburgh-based FreeMarkets has since been acquired by Sunnyvale, Calif.-based business software maker Ariba.)

Meanwhile, Compuware has agreed to acquire Covisint's Communicate portal software, its Connect EDI (Electronic Data Interchange) messaging system, and its Problem Solver dispute resolution technology. Compuware will establish Covisint as a separate business unit, Karmanos said, and will add the acquired technologies to Compuware's portfolio as a suite of products. Covisint will retain its name and former CEO Paul will run the new business unit, Karmanos noted.

About the Author

John K. Waters is a freelance writer based in Silicon Valley. He can be reached at john@watersworks.com.

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