Copyright 2004, Traffic World, Inc.
Software industry mergers mean opportunity for shippers: the chance to buy technology cheap.
Prices on a broad range of supply chain software systems aren''t likely to get any lower, said John Fontanella, an analyst with AMR Research. "Now is a great time to buy software - the market is on the mend," he said. "Before long, prices will go up. Now is the time to make the move."
The wave of mergers surging through the logistics software industry has swallowed dozens of companies but still it rolls on. Consolidation is reshaping the market and driving purchasing trends in some unexpected directions.
Worried whether software vendors will survive, some shippers are going back to building their own software rather than buying it, said Dwight Klappich, an analyst with Meta Group.
"I thought that market was dead," he said. Yet he''s seeing companies develop a variety of "across the board" technologies, from warehouse management to an entire operational business system. Although not a big movement, do-it-yourself software started coming back with the dot-com bust, about a year-and a-half to two years ago.
"That''s also a trend that affects vendor viability," said Klappich. It will continue if vendors continue to increase maintenance fees, he said.
Overall, is this up-and-down market good or bad for buyers and users? Neither Fontanella nor Klappich gave a ''yes'' or ''no'' answer.
"It''s not quite so simple," said Klappich. When one company buys another it can be very good, bad or unknown for customers, he said.
"Overall, it''s good in the long run. In the short run it might not be good because, if the vendor was struggling that badly, then more than likely they were going to go out of business. If someone is willing to throw them a life preserver" it''s good, he said.
A few years ago companies were purchasing other companies to be bigger than their competitors. Today vendors are buying companies to "get something valuable pretty cheap" or to help out a sister company - a "life preserver," he said.
"It''s almost like a foreclosure market. It can sometimes be good if it is driven by strategy, not just opportunity."
Another issue is the relative size of the companies. "Big companies have not had a good track record of buying technology companies," said Klappich. "It''s the case of the elephant stepping on the ant."
Fontanella also sees both sides of the acquisition coin. "On the bottom feeders, I''m not sure yet. It almost seems like they are buying the customer base. I can''t get a clear picture of what is going to happen to the applications they buy."
Then there are other companies that are "quality companies" and have money left. "There I wouldn''t be so concerned," he said.
The rollercoaster probably will continue for several years - three to four years in certain spaces such as warehouse management software, Klappich said. Meanwhile consolidations are occurring across the board:
-- Checkpoint Systems acquired a minority stake in Goliath Solutions to expand its radio frequency identification to point-of-purchase advertising and display technology. Goliath''s tags integrate to the display, in-store readers and a central database. Checkpoint made a $2.5 million investment in the company and will make design engineering, manufacturing, and field service resources available to Goliath. In addition, George W. Off, chairman, president and CEO of Checkpoint, will join Goliath''s board of directors. Checkpoint provides retail security, labeling and merchandising technology solutions.
-- Supply chain management software provider Verticalnet acquired Tigris, a supply-chain consultancy based in New York, for 1.9 million shares of stock and $3.5 million cash. The combined company will operate under the Verticalnet name. Tigris founder and CEO, Brent Habig, will join Verticalnet. The combined company is expected to more than double Verticalnet''s revenue in 2004 as compared with 2003. The transaction was effective as of Jan. 30. AMR Research analyst Pierre Mitchell gave the combination a thumbs-up for customers and the company. "Verticalnet is now in the right place at the right time with most of the right components," he said in a note.
-- JDA Software Group acquired the intellectual property assets and certain other assets of Timera Retail Solutions, a workforce management software, for $13 million cash. Timera''s technology will become part of the JDA Portfolio product suite, expanding the company''s offerings for retailers. Philip Alling, an analyst with Bear Stearns Equity Research, expressed some concern about the acquisition in a note to investors. "While this acquisition may enable JDAS to add to its top-line in an otherwise relatively flat demand environment, this move heightens our integration concerns at JDAS, especially as the company is on the verge of introducing its .Net platform."
-- Ariba purchased FreeMarkets, a supply-chain software company, for approximately $493 million. The combined company is known as Ariba and is led by Ariba''s CEO and Chairman Robert Calderoni. The company headquarters remain in Sunnyvale, Calif., but the company will maintain a significant presence in Pittsburgh. A spokesperson for the companies said both "will proceed with all committed product deliveries as planned, with both companies'' applications merging to a single platform over time." The combined company will also continue to offer services and support on both platforms until the technologies merge. Alling, although noting potential risks, gave the purchase a thumbs-up for Ariba in a note.
-- Supply-chain software provider Arzoon acquired event management technology from Vigilance. Vigilance assets will be available as an optional module of Arzoon LIFE or as a stand-alone product, said a spokesperson.
"Consolidation is inevitable," said Fontanella. Added Klappich: "if J.D. Edwards & Co. can be bought by PeopleSoft, anybody can be bought by anybody."