IBM's $129 million acquisition of CrossWorlds Software Inc. is expected to ease any worries the smaller vendors' customers may have had over the long-term direction of the company's software integration technology. Consolidation in the enterprise application integration market has become commonplace, with CrossWorlds competitors New Era of Networks and Active Software being bought by Sybase Inc. and WebMethods Inc., respectively.
Acquisitions make business customers nervous because of uncertainty over the direction of the software they've invested time and money in. However, AMR Research analyst Amy Hedrick says she expects IBM to absorb CrossWorlds' technology and its 350 employees with "minimal" impact on customers, while opening IBM's extensive catalog of products and services to CrossWorlds' users. "There's a fair amount of concern right now with the viability of small vendors, and for CrossWorlds customers, this removes that as something to worry about," Hedrick says. "Suddenly, they're customers of IBM and not a smaller vendor."
Paraic Sweeney, VP of marketing for IBM's software group, says CrossWorlds' technology, which connects applications so companies can automate a business process, such as receiving a purchase order, will become part of IBM's electronic business infrastructure, based on the WebSphere application server. In addition, CrossWorlds' tools for linking applications will become a part of the WebSphere Studio toolset. CrossWorlds is strongest in the manufacturing, telecommunications, and financial-services industries. The deal is expected to close in 60 days, pending approval from regulators and CrossWorlds' shareholders.
CrossWorlds reported Tuesday that revenue for the third quarter, ended Sept. 30, was $21.7 million, a 44% increase over the $15.1 million reported during the same period a year ago. Pro forma net income, excluding restructuring charges, and noncash charges for deferred stock-based compensation, was $900,000, or 3 cents per share, compared with a loss of $7.2 million, or 28 cents a share, a year ago. In July, company execs had said they expected to be profitable in the fourth quarter.