IT Investment Research

The Numbers Explain Why Oracle Should Abandon EU

I said in my post on November 12 Larry Ellison should ask himself whether it is even worthwhile for the new Oracle (ORCL)/Sun (JAVA) combination to do business in the information technology (IT) backwater that is the European Union (EU). Why go through the hassle of dealing with EU regulators when it appears the return on investment is so low? My suggestion is to just consummate the merger without EU approval and don’t do business in the EU.

A bunch of Euroblatherers on seekingalpha.com commented that my idea was anti-Europe bashing. One even criticized the quality of my photograph, which I love because it is a snapshot taken by friend in front of an old restaurant on Helsinki harbor. I love to go to places like that in Europe and look at the old cathedrals and decrepit palaces.  It’s just that the over-regulated EU is an increasingly bad place to sell enterprise software and IT.  Look at the numbers.
 
According to its 10K, Oracle received less than 15% of its revenue from the EU big three—the UK, France and Germany—during fiscal 2009.  And that’s down from 16% in fiscal 2008. Given those countries’ contracting economies that number is bound to keep dropping. Because the revenue is based on GAAP accounting, it would take some work to figure the real compare (e.g., would need to factor in the percent of business BEA and other acquisitions did in the EU) but maybe—best case and counting Slovenia and Wexford and all those other great bastions of industry—Oracle gets 20% or 25% of its revenues from the IT consumers regulated by the non-tech-savvy bureaucrats in Brussels.

According to its 10-K, Sun (JAVA) on the other hand gets almost as much revenue from Europe (that's not the same as EU but that’s the best number we have) as it does from the U.S. And a third of Sun’s U.S. revenue comes from Avnet. In fact, while Sun revenue in the U.S. dropped 25% in the last few years, it only dropped 15% in Europe. The trendline of Sun’s EU numbers vs. the U.S. numbers should forever be considered a good leading indicator of failure in the IT market for all companies. Clearly when everyone in the U.S. is bailing out of a company’s IT products and services as with Sun, but the IT consumers of the EU haven’t got the word, sell your shares. 

As with the Oracle numbers, there might be some falling/rising/falling dollar issue in those statistics. But I bet it wouldn’t take a lot of analysis to figure out that that revenue—whatever the apples-apples revenue numbers are—is no where near as profitable as doing business in real markets where politicians don’t try to regulate the shape of fruit. For example it looks like half the employment of the combined company would be European even though only 25% of the revenue comes from there.  If Snoracle gets out of the EU, that salary expense drop to the bottom line.

-- Dennis Byron

Memo to Oracle: With Sun Comes Widgets

With Oracle (ORCL) going to the mattresses with the European Union (EU) over its proposed Sun (JAVA) acquisition, many analysts are suggesting Oracle walk away from Sun.  I am suggesting Oracle walk away from the EU. Larry Ellison should ask himself whether it is even worthwhile for Snoracle to do business in such a backwater.

The EU is the place that 50 years after Plan Calcul is still trying to launch a nativist information technology (IT) company to compete with IBM. Larry, ask Neelie about Tulip.  Remember Cii and that crazy Siemens, ICL, Nixdorf, Bull, Olivetti thing in the mid 70s. No prolonged effort to get approval of the Sun acquisition is going to change that basic dynamic. No three-year effort to get to the Court of First Instance of Last Resort in Strasbourg is going to be worth spending all that time walking around in Stalinist architecture during days of little sunshine (the EU does not work in the summer and it rains all the time there in the spring).

So why go through the hassle of dealing with EU regulators when it appears the return on investment is so low? That’s especially true if Oracle is serious about keeping and growing Sun’s systems/storage business.  Software—the market that Oracle knows well—is portable. But message to Redwood Shores:

"With Sun, comes widgets."

So Larry this should be the opening position at the meeting on November 25, if you haven’t told the EU already: 

"Approve the Sun deal or the new Snoracle does not do business in the EU."

(Update on my post of November 10 about not being able to analyze the EU’s statement of objections, I received the following from the EU’s crack PR folks:  “We regret to inform you that Statements of Objections are not documents of public domain. They are sent to the parties concerned in the transaction.”  So I’ll have to wait until later this week when SAP leaks it to the Wall St. Journal.)

-- Dennis Byron

European Union Database Market Takes on Oracle: They Call the Wind 'Maria'

This is the battle I have been waiting for (at least until November 15 when New England takes on Indy).

I must admit part of my lust is just for the sport of it… to see Ellison do what Ballmer should have done. But it’s deeper than that. The statement of objections reportedly filed by the EU Competition Commissioner against the Oracle (ORCL)/Sun (JAVA) merger pits the statism of the 50-year European Union (EU) attempt to nationalize industries and markets, including a score of failed attempts to spawn an EU information technology (IT) industry and various EU IT markets, against a future world order totally tilted to the western part of North America and the rest of the Pacific Rim in all things economic and political, not just IT.

I’d really like to dig deeper into it but I cannot find the actual statement of objections being raised by the EU.  This makes it hard to comment but the paragraphs below summarize what Oracle says in rebuttal.  I am clearly not going to be disappointed because Oracle’s bombast is as usual seriously misleading and yet cuts to the quick. For example:

"Oracle's acquisition of Sun is essential for competition in the high end server market, for revitalizing Sparc and Solaris… "

Well that’s clearly not true because Sun has been a nonentity in the server market for some time so there is no essential competition.  I guess you could say it might be important to “revitalizing Sparc and Solaris……and for strengthening the Java development platform” but the IT market has already said it doesn’t care.

“The transaction does not threaten to reduce competition in the slightest, including in the database market."

This is apparently the heart of the matter and is true because no merger or acquisition reduces competition; bad products decrease competition. As usual, a bunch of European guys with an apparently bad database management product called Maria (forked out of MySQL but see paragraphy below)--unable to compete on a level playing field, the worldwide IT market--are trying to tilt the EU database software playing field in their favor.

“It is well understood by those knowledgeable about open source software that because MySQL is open source, it cannot be controlled by anyone. That is the whole point of open source."

This is a side issue, or at least it should be, but the statement is true.  Apparently the EU marches on because of the EU losers who were not able to take over the world with their low-functionality EU database software.  It’s the same meme as the loser Norwegians that screwed up Windows 7 because no one used their Opera browser.

“Oracle and MySQL are very different database products.

Well that’s not true.  Why would these EU losers who are marketing Maria start this battle if it was a different product than Oracle's database software.  The whiners know that it’s just that Maria is 30 years behind Oracle’s relational database research and development.  In theory, Maria could catch up if the EU tilts the playing field enough.

“The U.S. Department of Justice carefully reviewed the proposed acquisition during the normal Hart-Scott-Rodino review and considered it again when the European Commission initiated a second phase review.

Well Larry, that's not a winning argument.  Don't you know that nothing makes the EU feel more comfortable than telling them the American government thinks it’s OK.  Look how well the EU is coming through in Afghanistan. I hope Ellison has already made the threat Ballmer should have: 

"Approve this or Oracle is out of Europe.  Who needs your dying statist economy anyways?"

-- Dennis Byron

Did Romney Plan to Ride the Microsoft Anti-Trust Lawsuit to the White House?

In preparing my recent annual blog post correcting the record concerning Massachusetts' so-called adoption of so-called open standards by so-called "brave Massachusetts technology execs," I came across some academic research on the subject.  It is written by three Universitiy of Illinois (UI) professors and is in some unclear manner funded by the National Science Foundation (NSF).  The UI professors' research depends heavily on the open standards blogosphere propaganda lie that Microsoft (MSFT) killed the open standards effort here in Massachusetts through aggresive lobbying in 2006. 

That's all Sun (JAVA)/IBM Kool Aid of course but the academic paper got me thinking: mabye this really had more to do with the Massachusetts lawsuit against Microsoft over Internet Explorer and the fact that Mitt Romeny was running in the 2008 U.S. presidential election from the minute he became Massachusetts' governor in January 2003. In reading about the role the UI academic research ascribes to former Mitt Romney aide, Eric Kriss, I decided to re-analyze my opinion. I believe that the effort to foist "open standards" on Massachusetts government was simply the misguided effort of a few low-level information technology (IT) bureaucrats in one department of one part of one branch of Massachusetts' three-branch, multiple-part, multi-departmental state government, aided and abetted by relatively low-level IBM and Sun guys. 

But maybe I should put my Massachusetts politician hat on.The Kriss connection spurred me to read some of my own contemporaenous analysis of the Massachusetts IT Commision, which met throughout 2002-2003, predating all the publicity about open standards by two years. This was also during the period when Massachusetts was the lone holdout or one of the few holdouts against settling the Microsoft anti-trust action begun years earlier by the U.S. Department of Justice (DoJ).  Perhaps Romney's aides thought they could run that issue--or the good-government (known as goo-goo here in Mass.) idea of openness--into a presidential campaign issue.

The "open standards" crusade had actually begun with a legitimate open source idea to preserve Massachusetts' government intellectual property (IP).  It had nothing to little to do with public records or open document formats at the beginning in 2002. But upon taking over the governorship as the IT Commission was wrapping up its work in 2003, the Romney administration twisted the obviously good idea of preserving Massachusetts' own IP into a potential mandate to acquire only open source licensed IP.  A Senate committe quickly nixed that idea for a lot of reasons (most important of which is that the Romney administration could not demonstrate a return on investment) and the open source idea slowly morphed into an open standards idea related to public records and announced in 2005. 

The problem, as explained elsewhere on this blog, is that the Governor has nothing to do with public records in Massachusetts. The rest is history as they say, albeit in this case one of the few historic records written by the losers at IBM and Sun. And of course the Romney campaign failed--if that was its intention--to light a fire with this goo-goo idea or any other and lost almost every presidential primary he entered in 2008.

By the way, I can't tell if the UI academic research is just unintentionally error-ridden or intentionally misleading.  It admittedly depends on what it calls "anecdotal" evidence when--as explained in my previous blog post--all kinds of clear, crisp Massachusetts public records, including all the material related to the 2002-2003 IT Commission noted above, are available to explain what really happened.  One of the professors told me he read the IT Commission materials but I see no mention of it in the academic paper.

I have written the professors to see if I can get some of these issues cleared up.  How I get them retracted is more of a problem. Having this bull forever out there on the web sites of already discredited media outlets is one thing.  Having it preserved forever in some NSF-sponsored official looking document is another.

-- Dennis Byron

IBM, Oracle, Microsoft Not Worried about a Drupal White House

If you follow the growth of content management software (CMS) in the enterprise software market for a living and also follow United States (US) politics as a civic responsibility, your worlds intersected during the week of October 26.  The leading related headlines in the blogosphere in terms of most frequent appearance went something like this:

• "White House Switches to Drupal, Making Obama Our First Open-Source President.."
• "WhiteHouse.gov goes Drupal: can open source lead to open government?"
• "White House opens Web site programming to public."

So if you invest in IBM Filenet, Oracle (ORCL) Stellent, Microsoft (MSFT)  Sharepoint or dozens of other CMS products marketed by publicly traded companies [e.g., Autonomy (LSE:AU), EMC (EMC) Documentum, OpenText (OTEX), and more], should you be following these developments closely? 

The answer is yes, but don’t depend on any of the stories or blog posts that appeared on the blogosphere during the past week for your background information.

You should pay attention because CMS is a hot enterprise software market area that should buoy many of these public companies’ share prices over the next decade as the need to manage unstructured data (like rich web site content, email databases, etc.) becomes more prevalent than managing structured data (like numbers, names and addresses in an ERP system, supply chain logistics, etc.).  Just as the ERP market matured and consolidated during the 2000-2009 decade, CMS will mature and consolidate between now and 2019.  So there will be winners and losers just as with ERP, a market that could not support the dozens of separate suppliers that existed 10 years ago and that has now effectively been winnowed down to a few choices (Intuit, Microsoft, Oracle, Sage and SAP).

As for the whitehouse.gov stories that have permeated the blogosphere this week, I have not seen so much drivel and deception since 2005 when IBM and a few low-level information technology (IT) bureaucrats in Massachusetts tried to convince you that Massachusetts was some kind of leading-edge proponent of Sun (JAVA) Open Document Format. The Drupal postings whose headlines are noted above are full of the same kind of incredible misinformation as the Massachusetts ODF articles of 2005:

• As explained here on capitalgig.com, Obama was NOT the first open source president when it came to CMS at least (Clinton probably was but no one from that era has weighed in)
• Open source—at least commercial open source marketing that involves red, white and blue for-profit companies such as Acquia, the sponsors of Drupal, along with General Dynamics (GD), the developers and implementers of the current whitehouse.gov—has nothing to do with open government and GD’s and Acquia’s market dynamics are exactly the same as IBM’s, Oracle’s, etc.
• The White House did not open its website’s code to the public; that would be just plain dumb

As for all of the blogoblather about Drupal there were a set of anti-Drupal headlines during the week as well.  For example

• "Why Drupal in the White House is a Bad Idea"
• "Obama's biggest blunder - Drupal?"

Less you think these posts come from George W. Bush supporters mad that he wasn’t given the credit he deserves (as if he even knows what the discussion involves) for putting up an open-source-Perl-based CMS in 2001-2002 or from IBM, Oracle, etc. CMS proponents worried about Acquia and its 300 support customers, neither is the case.  All the anti-Drupal vitriol comes from other open source CMS products.  Go figure.

And only one blog post that I saw in the past 10 days pointed out that Drupal got kicked off the recovery.gov web site at the White House the same week that it got put on the whitehouse.gov web site.  Not much investment potential in a marketing machine that loses one for every one that it wins.

AP Reports Open-Source-Based Software Failed to Meet Obama Team Needs

As I blogged about on October 26 on itbusinessedge, the Associated Press (AP) is providing the only independent primary-source for a report dated October 24 that whitehouse.gov has changed its underlying content management software (CMS).  This is a category of software that includes EMC Documentum, IBM Filenet, Oracle (ORCL) Stellent, OpenText (OTEX), dozens of open-source-licensed products and projects, and software sold as services associated with Microsoft (MSFT) Sharepoint. For most IT staffers, the whole subject is kind of yawner—IT shops change underlying software every day.

No one would probably even write or blog about the change except for the mangled set of facts put out on the AP wire, and the difficulty trying to clear them up. Neither General Dynamics (GD), the large federal contractor that did the work according to the supplier of the new CMS software, or the supplier itself can or will say what the old CMS was or what other new CMS options were looked at by GD or the White House or even answer simple questions about how or when the contract to do the work was awarded and how much the new change cost. 

• Acquia, which is funded by North Bridge Partners, Sigma and Partners and O’Reilly Media’s venture arm, is the developer of the new CMS. But it deflects questions to its PR agency which says, we’re not “at liberty to say” in response to the above questions.
• “I will forward your question to our customer (presumably meaning the White House) as they have requested,” says the General Dynamics’ spokesperson, the prime contractor for the White House Communications Agency but better known as the tanks and submarine manufacturer that did over $12 billion in business with the U.S. government in its Fiscal 2009 just ended.  (General Dynamics got into the information technology business by acquiring Anteon in late 2005.)

GD won't even say if it has ever done a press release about the subject. Acquia won't even say how many developers it has working on the product.

So falling back on the AP report, here’s what we know--or more appropriaely don't know--with some educated-guess commentary:

• “White House opens Web site programming to public.” -- Presumably that headline, which appears hundreds of time on the web in publications that picked up the AP story, refers to the fact that the new CMS is an open source licensed project supported by Acquia, in the way that Fedora is an open source project supported by Red Hat (RHAT). It is unlikely that the White House is inviting random programmers to change its code base.
• “Security is fundamentally built into the development process because the community is made up of people from all across the world, and they look at the source code from the very start of the process until it's deployed and after." -- We don't know from the AP story what the security issue was at the Bush White House that General Dynamics had to fix.
• “It will be a much faster way to change the programming behind the Web site. When the model was owned solely by the government, federal contractors would have to work through the reams of code to troubleshoot it or upgrade it. Now, it can be done in the matter of days and free to taxpayers.” -- Presumably the revenue loss to General Dynamics will be minor as federal contractors will be replaced by thousands of volunteers.
• “It didn't let the tech-savvy Obama team build the new online platform it wanted. For instance, 60,000 watched Obama speech to a joint session of Congress on health care. One-third of those stayed online to talk with administration officials about the speech. But there are limits; the programming used to power that was built for Facebook, the popular social networking Web site.” -- As with other sections of the AP article, the antecedents of the many “its” and “thats” are hard to follow but apparently the open-source-based Facebook was not up to the challenge that the Obama team wanted or needed to tackle. (However I don’t believe the AP meant to say that Facebook was the outdated CMS technology used by the Bush administration, since the AP refers to that technology as the 'proprietary Bush technology.')
• “It comes more cheaply than computer coding designed for a single client, such as the Executive Office of the President. It gives programmers around the world a chance to offer upgrades, additions or tweaks to existing programs that the White House could - or could not - include in daily updates.” -- I am almost certain that the Obama administration does not want programmers sending upgrades or tweaks to the White House—send them to Acquia.

Other independent web sites, in particular techpresident, the Register and CNet, have taken some good educated guesses on the subject as well.

-- Dennis Byron

Open Standards Bigots Still Putting Out the "Big Lie" about Massachusetts and ODF

About once a year, some blogoblatherer peddles the “big lie” that earlier this decade all State of Massachusetts government information-technology (IT) groups were major supporters of Sun's (JAVA) Open Document Format. So once a year, being Massachusetts born and bred, I feel the need to knock down the Massachusetts/Open Document Format (ODF) 'big lie" by providing links to the relevant public records.

This year the offending blogger is Paula Rooney of ZDnet (see her paragraph about "brave Massachusetts technology execs") but if not her, it would be someone else before long. It is unfortunate that she did not check her own web site before writing about the "brave… execs." In addition to the relevant official state documentation on the subject in the links below, there was some pretty good contemporaneous reporting of the back-room dealings between Sun and a few state IT employees right on ZDnet. One of the more telling sentences about what appears to me to be a Sun-ODF effort to manipulate Massachusetts was this information from David Berlind of ZDnet in October 2005:

"Although it isn't clear what Massachusetts' test for openness was back in the early 2005 timeframe, it is clear that "the test" was officially revised... by the time (Massachusetts' Enterprise Technical Reference Model) ETRM was ratified on Sept. 23..." 

Why (and how) the test was revised was answered in 2006 but the open standards blogoblatherers conveniently leave out that fact. The information about a flawed process developed by Berlind was confirmed in a Massachusetts legislative report, which said that that particular version of the ETRM (3.5) was put together by a "kitchen cabinet," which not only failed to give outsiders such as Microsoft (MSFT) a reasonable chance to comment on or react to its plans but also froze out all other relevant Massachusetts IT groups, including the ones involved with aiding the disabled and those in charge of public records.

The legislative report lays out how this small group—actually one department in one part of one branch of the Massachusetts government—took numerous underhanded (even by very generous Massachusetts state government standards) to try to wire the procurement process for Sun. The “brave… execs” issued--possibly illegally according to the legislators--ETRM 3.5 saying that Massachusetts government would only use documents produced in the following four "standard" formats: HTML, Sun ODF, Adobe (ADBE) PDF and TXT. Note that there were four “standard formats” listed, not just ODF. "Standard" is in quotes because PDF was no more a "standard" at the time than Microsoft’s Office formats but clearly the "brave... execs" had to make their "open" version of the ETRM look somewhat open.

The effort was part of a multiple-year process that began in 2002 with a study by a state-sponsored group called the IT Commission, apparently orchestrated by the same "brave... execs." The IT Commission was “facilitated” by IBM (IBM) consulting employees under contract and included a Sun employee but no Microsoft employee. IBM uses ODF in one of its less popular Lotus products or at least did so at the time. Microsoft was a major supplier of technology to Massachusetts at the time (and still is I believe) and should have been represented on the commission or all vendors should have been barred.

The legislative committee concluded that Rooney's "brave... execs" were:

“… not aware of the cost of the ETRM, the impact it could have on the state’s public records, limitations on IT accessibility for persons with disabilities, that the agency excluded key governmental and advocacy groups, and that the proposal was issued in violation of state law.”

The above is the summary.  The details run on for 30-40 pages. The finding of disregard by ITD and the IBM-Sun group for the disabled bordered on immoral, a much more serious charge than illegal here in Massachusetts.
 
Today as in 2005 the issue of document format standards is, as it should be, a miniscule part of Massachusetts’s ETRM (now in its fifth version). New IT management in state government gave Microsoft a chance to make the list and gave Sun a chance to make ODF handicapped accessible. Massachusetts considers HTML, ODF, OOXML, PDF, RTF and Text to be acceptable document formats. The issue of accessibility for the disabled is now a key part of the IT procurement process.

Common sense triumphed over the attempted Sun-ODF coup in Massachusetts earlier this decade. Unfortunately other Massachusetts politicians went on to try to extort money out of Cognos.

-- Dennis Byron

MySQL to Oracle? Marten Says “Kylla!” Monty Says “Ei!”

In dueling blogoshots released in October 2009, the two Finns most associated with the MySQL database software company, which they sold to Sun (JAVA) in 2008 for a bazillion markaas, are urging the European Union in opposite directions when it comes to Oracle’s (ORCL) takeover of MySQL (by virtue of Oracle’s pending acquisition of Sun). 

Marten Mickos, the CEO of MySQL from 2001 to 2008 and now an entrepreneur in residence in Silicon Valley at big MySQL cash-out winner Benchmark Partners, says

"Oracle has as many compelling business reasons to continue the ramp-up of the MySQL business as Sun Microsystems and MySQL previously did, or even more. Even if Oracle, for whatever reason, would have malicious or ignorant intent regarding MySQL (not that I think so), the positive and massive influence MySQL has on the DBMS market cannot be controlled by a single entity--not even by the owner of the MySQL assets. The users of MySQL exert a more powerful influence in the market than the owner does." (Source: CNet)

Ulf Michael Widenius (called Monty), co-creator of the MySQL project, founder of the company of the same name in 2001, and now founder of the MySQL fork project called Maria, says (on his blog post quoting himself from a press release that was not released):

“… Oracle should resolve antitrust concerns over its US$7.4 billion acquisition of Sun by committing to sell MySQL to a suitable third party… MySQL needs a different home than Oracle, a home where there will be no conflicts of interest concerning how, or if, MySQL should be developed further."

Mickos wins this Arctic Circle standoff on the numbers from an information technology (IT) investment perspective.  Oracle can’t sell MySQL because it’s sitting on Sun’s books at a half a bazillion markaas and is probably only worth about as much as a markaa is today given the trivial number of paying MySQL customers estimated by Mickos in his blog post.  

Monty's argument against Oracle makes no sense in that he has already forked the project. And anyone else can as well because of the license terms and conditions he used to initially release it.

Of course Mickos' trivial numbers kind of fly in the face of Mickos’ claim to the EU Anti-competition Czar Neelie Kroes that MySQL has a “dramatic effect” on the database market. Unless the dramatic effect is that non-paying customers are not buying database software, something that disagrees with what I see in the marketplace. But Neelie wants out of this job so badly she already gave Microsoft (MSFT) everything it wanted in a recent decision.  She probably wants out of there before Ellison starts tearing into her. He won’t meet her for a quiet breakfast of Belgian waffles some morning the way Ballmer did.

-- Dennis Byron 

Ballmer Does Boston

People that live in first-tier towns like NYC, London, San Francisco and Chicago always say they cannot believe how provincial Boston is. As a native, the charge always bothers me but Boston keeps proving what a one-horse parade it runs--even in terms of the enterprise-software world--when it gets all a twitter (literally and figuratively) over the fact that Microsoft’s (MSFT) Steve Ballmer met some people in Boston (actually across the river in Cambridge I think) for breakfast on Friday morning October 16. 

The home-town Boston Globe is all over the “story,” except that there does not seem to be a story.  They just had a business breakfast like the last 5000 business breakfast you’ve attended.  According to the Globe, the “guest list” included an eclectic bunch for sure:

• Two old enterprise-software dinosaurs, now VCs, Dan Bricklin from the 70s (Visicalc) and John Landry from the 80s (Lotus)
• A much younger dinosaur, Bill Warner, who founded Avid Technology (AVID) in the 1990s and now seems to mentor enterprise software folks
• A bunch of younger VCs (Microsoft is always on the prowl; it picked up its Chief Technology Officer Ray Ozzie in Massachusetts, not that Ballmer needed a VC breakfast to find Ozzie)
• A college president, Gloria Larson (not a college whose name you’d recognize unless you follow Division II basketball where Bentley is nationally ranked perennially; Larson has the college presidency because of politics, probably the same reason she was at the breakfast)
• A couple of leading local Internet entrepreneurs (and the head of the Mass Technology Leadership Council that designated them “leading local entrepreneurs”)
• A twit named Laura Fitton; read it for yourself; I can’t make this stuff up (actually Steve Mann is advising her so she might have something going under the twill)

The Globe is hard at work trying to find out what was discussed other than “Do you believe it snowed in Boston on October 16th?” 

Looking at the guest list I see two themes: mentoring and old and new software start-ups.  Take a guess at which subject Ballmer was probably interested in.

-- Dennis Byron

What's Rocket Software Going to Do with $90 Million

The October 13 squib by Kara Reeder on IT Business Edge about Rocket Software sent me on scavenger hunt the morning of October 14. The Boston Globe article to which Kara referred and subsequent links and Googles implied there was a mystery with questions such as

• “How large an enterprise-software company is Rocket?
• “Where did the new investment come from?”
• “Who are the 24 companies it has acquired?”
• “What was the patent lawsuit with CA settled in February 2009 all about?”

Questions I was asking myself after following the threads from Kara’s piece included

• “Why does a Dutch company have to file with the U.S. Securities and Exchange Commission (SEC)?”
• “How did that acquisition of Seagull turn out, any way?”
• “IBM UniVerse… the UniVerse name rings a bell but I don’t associate it with IBM?”

There’s a lot of speculation about the timing of the announcement that Rocket acquired IBM UniVerse on October 1 and the SEC filing on October 9 but I don’t think it’s likely that Rocket Software, doing $50 million or so in software sales a year, paid over $90 million for IBM’s UniVerse business. Maybe Rocket sought financing so as to pay off CA—and have a little left over to afford a tony (or is it spelled toney?) Massachusetts address like Newton. But why bother if it has five years to pay back CA.

So here (I apologize for the open-barn-door nature of it) is some belated information technology (IT ) investment advice that might still be actionable. Work your way down the Software 500 list looking for slow-growing publicly held infrastructure enterprise-software suppliers, likely with an IBM mainframe connection. 

Rocket Software, a company that has apparently been quietly funding acquisitions from its profits for a decade, now has some real money in its pockets.

-- Dennis Byron

(P.S. The answers to all my questions follow if you care:

(The answer to the SEC-related question was easy, just a matter of bad memory on my part.  It wasn’t Rocket Software that was Dutch. It was good old Seagull, the mainframe screen scraper guys acquired by Rocket in 2007. To be less flip, Seagull described itself at the time of the acquisition by Rocket as specializing

“... in technology that transforms "legacy" applications into SOA-compliant Web services, helping enterprises achieve exponentially faster IT support for business change, governance and compliance.” 

(Seagull continues to market its software separate from Rocket. Rocket is based in Newton, MA and was formed in 1990, making it probably the “youngest” IT/enterprise-software company with a “Route 128” address. Route 128, which circles Boston, was of course the Highway 101 of its day.

(The SEC filing is a Rule 505 Form D event. Rule 505 allows some companies offering their securities to have those securities exempted from the registration requirements of the U.S. federal securities laws. As the SEC site explains:

(“Form D is a brief notice that includes the names and addresses of the company’s owners and stock promoters, but contains little other information about the company.”

(That’s for sure when it comes to the Rocket filing.  I remember chasing down Rocket when they acquired Seagull but hadn’t paid much attention before or since.  They apparently liked their privacy and that was OK with me since no one would be investing in them. Well that was only half true.  You were certainly investing in the many companies Rocket acquired for dimes on the dollar and with little outwardly publicized funding—until this recent SEC filing—except for a line of credit from Wells Fargo.

(Catching up with Rocket now, it looks like its acquisition bandwagon has been at the head of a little known parade for a decade. Rocket is to infrastructure enterprise software what Infor is to applications enterprise software (that is, what the old Computer Associates used to be to all enterprise software). Acquired companies and brands in addition to Seagull (Bluezone/Legasuite) include Areotext (from Lockheed), ARKIVIO, CorVu, Gentia Assets (from Open Ratings) some IMS utilties from Telcordia, Mainstar, NetCure, Peritus, Servergraph, SmartDB, StorageNetworks STORos Storage Manager, SystemsSoft, and TSCI.  Rocket tried to scoop up NetManage, a Seagull competitor, in 2008 but NetManage ended up going to Micro Focus.

(As for the implied mystery, the privacy fetish is apparently still a Rocket Software company characteristic. How large is Rocket Software? I found that although Seagull and CorVu were listed on the Software 500 before they were acquired, they don’t seem to be separately listed in the latest John Desmond bible.  And Rocket is not there either that I can see. My guess: maybe this smorgasbord is doing $50 million a year in software sales.

(As for the law suit with CA, Inc.--not to be confused with the old Computer Associates, two years ago CA said that certain Rocket developers misused intellectual property from one of the CA-related entities and improperly incorporated software code from it into certain software products being developed at Rocket as far back as 1999 and 2000. Rocket said at the time that it believed that “the claims are meritless,” but in Febnruary of this year Rocket agreed to license technology from CA, including source code authored several years ago and related trade secrets, for $50 million to be paid in increments through 2014--see the latest CA, Inc. 10-K.

(As for my final question, over the years, Rocket had purchased the Visionary brand from IBM back in 2000 and has many other mainframe-oriented products as noted above. That, I guess, is what led up to the October 2009 acquisition of IBM UniVerse.

(My memory cells clicked in since I began writing this post 15 paragraphs above. My thought association exercise went like this:

• UniVerse…
• Jim Capeless…
• Paris in the early 1970s...
• Dick Pick

(Some of the story belongs on my travel blog, not here. Most of it belongs in my unwritten “People’s History of Information Technology,” where people like Pick and Capeless get treated with the same depth as Gates and Jobs. If I ever write it, it will be a history where the winners (Highway 101 again) don’t get to write the history books.

(But the nut of it is that UniVerse is a remnant of IBM's acquisition of the database part of Informix in 2001, part of which had previously been called Ardent, which was formed by a merger of Unidata and VMark in 1998. VMark, where Capeless was President in the 1980s and 1990s, after working for Honeywell Bull in the 1960s and 1970s, had written its own version of the legendary Dick Pick’s widely licensed data management concepts back in the 1970s.

(Making this even more confusing, what was left of Informix was re-named Ascential, which was also acquired by IBM in 2005.)