Planned Software Mergers May Boost B-to-B

SAN FRANCISCO (05/23/2000) - They may be among the least sexy software mergers in history, but WebMethods Inc.'s proposed acquisition of Active Software Inc. for $1.3 billion and Vignette Corp.'s $1.7 billion deal to buy OnDisplay Inc. - both announced yesterday - are indicative of the growing momentum behind business-to-business e-commerce.

WebMethods doesn't get a lot of press because its product is invisible: The software enables companies to share data, whether or not they use compatible software. But the Fairfax, Virginia-based company has become a major player in b-to-b electronic marketplaces because it enables companies to integrate their back-office systems with the marketplaces without manually re-entering online transaction data. That saves millions of dollars and provides a significant part of the efficiencies that have spurred Internet marketplaces.

Active Software is a leader in "enterprise application integration," a hot b-to-b term that's intelligible mainly to nuts-and-bolts programmers. Here's a translation: The firm, based in Santa Clara, California, ties together internal software applications so companies can, for example, pull years of data from an IBM mainframe and make it available to everyone in the company. That also makes for efficiencies and provides the sort of wealth of information that companies want when they join the cooperative marketplaces. By teaming up, webMethods and Active Software hope to become a one-stop shop for internal and external integration.

"Previously, companies had to deploy two separate integration applications, then integrate the integration," says Phillip Merrick, president and CEO of webMethods, in a conference call with analysts. "Now, there will be one platform for Global 2000 companies and b-to-b trading exchanges."

Another translation: One less set of software programs means less time spent integrating them and less room for error. That could mean Internet marketplaces would help speed business along, in whatever industry.

Active Software shareholders would receive 0.53 of a webMethods share for each share of Active Software they hold. The deal values each Active Software stock at $45.85, a 40 percent premium over its Friday closing price. Merrick would remain chairman, president and CEO of the merged company. Active's CEO Jim Green would become CTO and executive VP for product development. Analysts expect the combined company to have $100 million of revenue this year.

The Vignette-OnDisplay deal is also driven by the need to integrate internal and external IT systems. Vignette of Austin, Texas, recently introduced an e-commerce software suite that enables companies to manage and personalize content, analyze customer data and run online sales campaigns. OnDisplay of San Ramon, California, makes software that helps businesses share electronic purchase orders and inventory status checks, invoices and product catalog data.

Vignette said the combined company would offer electronic-marketplace software that links the back-office systems of buyers and suppliers. Vignette would trade 1.58 of its shares for each OnDisplay share. The deal values each OnDisplay share at $69.22, a 30 percent premium to Friday's closing price.

Both deals could help accelerate the use of online marketplaces by providing better means for companies to automate their dealings on those marketplaces.

"A lot of the online marketplaces are typically built around big, ugly, brick-and-mortar industries," says Steve Sigmond, managing director at Dain Rauscher Wessels. "Without a rapid integration solution, it would be hard for those marketplaces to get up and running quickly."

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