RealTime IT News

Method to the Madness

Yesterday kicked off a brisk week in billion-dollar merger activity with two runaway announcements. Fairfax-based webMethods announced its $1.3 billion land-grab of Active Software , when shortly after, word hit the Street of Vignette's stock-swap with OnDisplay .

First off, webMethod's deal looks like the better of the two here. The software newcomer swaps a half share for every Active Software share, and some might think that's a pretty fair shake. Well it is if you're webMethods. I'm not saying it's highway robbery, but it's a bargain to be sure. So webMethods shareholders ought to relax.

By the look of the fallout, you'd think the company announced plans to merge with one of Barry Diller's tired properties. I suppose that's to be expected on this tech train wreck fueled by irrational exuberance. Only now it's minus the exuberance.

The deal wraps up in the third quarter of this year and has webMethods' skipper Phillip Merrick at the helm of the new company, while Active's top banana Jim Green will come on as CTO and executive vice president.

WebMethods has staked its future on eXtensible Markup Language (XML), a nascent standard for sharing data on the Web. The upstart has a worthy footprint in business-to-business, making software that connects customers and partners with real-time info delivery.

Now maybe Santa Clara-based Active Software execs saw something I didn't, but I'm thinking they should have played a little harder to get. Maybe some fine dining and a movie!? Sure, the upstart's stock price has fallen on hard times, but the premium paid looks like a cheap date.

The middleware developer's bread and butter is making software that allows businesses to marry incompatible internal applications, enabling integration between a wide variety of heterogeneous systems. The company adopted a B2B spin by putting together systems that implement and automate business processes across multiple applications.

A merger between these two would combine webMethods' external integration with Active Software's internal integration without too much overlay. During a raging bull market, both companies could have handily stood on their own, but that was when the B2B buzzword still held some sex appeal. Now it makes shrewd sense to put both under one roof.

The grim reality is that webMethods competes with more rivals than you could count on fingers and toes. Consolidation wasn't so much an option as a necessity, and this buyout goes a long way in creating some wiggle room in a crowded field of me-too competitors. Watch for this latest announcement to send those same competitors into a tizzy trying to find a dance partner of their own.

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