IBM to buy Informix database operations in $1B deal

IBM Corp. Tuesday announced a deal to acquire Informix Corp.'s database business for US$1 billion in cash, ending eight months of speculation about the fate of the troubled Informix operations and potentially strengthening IBM in its head-to-head competition with rival Oracle Corp.

The acquisition would provide IBM with at least 120,000 new database customers, according to Brian Staff, vice president of marketing at Informix's database unit in Menlo Park, Calif. That total accounts for roughly 13 percent of the Unix database and data warehousing installed base and 5 percent of all database users, Staff said in an interview last week.

The deal also could help improve IBM's hand in the distributed database business, a key strategic priority for the company. IBM recently reported that its distributed database revenue grew 36 percent year-to-year in this year's first quarter, and executives Tuesday said the Informix acquisition will greatly increase IBM's standing in that part of the market.

The addition of Informix's database business "effectively doubles our position in the marketplace for distributed databases," said Steve Mills, senior vice president and group executive of IBM Software, during a teleconference. Altogether, he added, IBM expects to have more than 500,000 database users worldwide once the deal goes through.

The acquisition, which is due to be completed during the third quarter, will also add more than 2,000 database developers to IBM's payroll. Calling that a big advantage in "the war for talent" against competitors such as Oracle, Janet Perna, general manager of IBM's data management unit, said the company is "fighting to win. We are playing for first place."

IBM plans to integrate Informix's database operations and personnel into Perna's division and will continue to sell Informix's products through an integrated sales force. Likewise, IBM said it will maintain existing relationships with Informix users and business partners, including support for all current Informix products.

However, Perna said IBM's DB2 Universal Database will be the foundation for future products. "No customer will be forced to migrate to DB2," Perna said, but she added that the combined IBM-Informix sales force "will lead with DB2 for new customer acquisitions." In addition, some Informix technologies, such as its analytical tools, will be integrated into DB2.

The database sell-off comes as Westborough, Mass.-based Informix is emerging from a massive corporate restructuring. Last September, Informix split itself into two independent operating companies: Informix Software, which focuses exclusively on databases, and Ascential Software Inc., which took over responsibility for its information management applications.

Informix officials said in recent interviews that they were optimistic the renewed focus on database technology would begin to pay off for the company. But analysts weren't so sure, citing concerns about the number of different database products that Informix was trying to maintain simultaneously.

"The problem with Informix was that it flip-flopped back and forth on its market positioning," Betsy Burton, an analyst at Gartner Inc. in Stamford, Conn., said before the sale to IBM was announced. "Informix has still not come out with a very clear strategy on how they are going to reconcile the seven different sets of database code they now maintain," Burton said. "For that reason, we think they're going to lose market share over the next four years."

But Jim Foy, president of Informix Software, said during Tuesday's teleconference that the deal with IBM should provide a boost. "We feel the opportunities for synergy are considerable," said Foy. "We absolutely have a great chance to win big in this growing marketplace."

After IBM takes over the database unit, Informix plans to change its name to Ascential Software and continue to run that part of its business. Informix Tuesday reported that the Ascential division had revenue of $33.3 in the first quarter and said its annualized sales are in the $130 million range. Informix had total revenue of $929.3 million last year.

During this year's first quarter, the company's database operations did $183.8 million in business, resulting in overall revenue of $217.1 million for the three months ended March 31. That was down from $250.9 million in the same period a year ago, and net profit declined to $18.3 million from the year-earlier level of $27.1 million.

Ironically, IBM early last year filed a lawsuit charging Informix with infringing on six patents related to databases and distributed processing technology. Tuesday, in addition to the acquisition agreement, the two companies announced a joint development and marketing deal under which IBM will resell some of Ascential Software's data warehousing and media asset management tools.

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