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chinadotcom Nixes e-Lux, Acquires IMI

chinadotcom , through its subsidiary company CDC Software, on Tuesday announced the acquisition of supply chain management (SCM) software provider IMI Corp.

chinadotcom took over the company after gaining a 51-percent majority stake; Palo Alto, Calif., Symphony Technology Group holds the other 49 percent.

The acquisition of IMI is a proven moneymaker for chinadotcom, which has had to fend off inquiries from the investment community recently over its earnings reports. Officials say they are now on the mend, taking losses of $11.2 million from last year down to $267,000 in the second quarter of 2003.

IMI provides SCM solutions for a bevy of blue-ribbon clients including GE, AT&T, Starbucks, Campbell Soup, Dial, Frito Lay, Kellogg's, and Warner/Electra/Atlantic. chinadotcom expects to immediately begin rolling up IMI's revenues into the chinadotcom balance sheet, starting this month.

Officials said the acquisition provides three key components for the manufacturing industry - order management, warehousing and logistics

"As China plays an ever increasing role in global manufacturing, especially since its entry into the (World Trade Organization), we see growing demand from Chinese companies and multi-national companies operating in China for SCM solutions, including order management, warehousing and logistics -- to link up factories in China with demand centers around the world. We believe IMI will allow us to best serve this need," said Peter Yip, chinadotcom chief executive officer.

The buyout also compliments another pending acquisition -- Ross Systems, Inc. for $68.9 million -- announced Thursday. Ross is another software provider serving the manufacturing industry. Tied with IMI, Yip expects to be able to provide a compelling product for China's burgeoning manufacturing sector.

"IMI has special strategic value for us since SCM is a critical front-end requirement to any modern ERP package, and IMI's SCM solution is a world leader," he said. "We feel that it complements our pending acquisition of Ross Systems, a leading process manufacturing software company, in terms of geographical presence, complementary product channels, and potential cross-selling opportunities to both customer bases."

The IMI buyout comes at the same time the parent company signaled an end to acquisition talks with short-message service (SMS ) provider e-Lux of Japan. SMS is used primarily in the mobile phone industry for text messaging.

Earlier this year chinadotcom purchased Newpalm, another SMS provider, and while the company was looking for a provider to cover the southern provinces of China, e-Lux was likely hesitant to agree to the terms of the deal.

Instead of a stock or cash buyout, chinadotcom wanted to pay e-Lux 20-40 percent in advance and make future payments dependent on how well the company performs going forward, what officials called a "earn-out" or "clawback."

It's likely the two companies will instead focus on working together as two entities, instead of one.

"We believe this mutual decision is in the best interests of both companies and we look forward to potential future business co-operation with e-Lux by leveraging its product strengths in the SMS market sector to bolster our nationwide SMS distribution platform across 26 provinces," said Daniel Widdicombe, chinadotcom chief financial officer, in a statement Tuesday.