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Informatica To Acquire Striva For $62 Million

The board of directors at Striva Friday agreed to the $62 million stock purchase of its mainframe data integration company to one-time customer Informatica.

For the past two years, Redwood City, Calif.'s, Informatica has been a customer at Striva, selling the mainframe package as an office end manufacturer (OEM) component to its PowerConnect data integration and business intelligence software. The deal still needs to pass regulatory approval before it's finalized.

According to officials, Informatica's data integration and business intelligence software has had some of its biggest sales when tied with Striva's mainframe component. Striva, which specializes in gathering real-time data and transparent access to relational and non-relational data on the mainframe, also has a blue-ribbon clientele that includes Hewlett-Packard, J.P. Morgan Chase and Xerox.

The deal also puts Informatica in plain view of a lot of new potential customers, and gives them another selling point to the estimated 96 percent of its customers who don't already have the mainframe component in their network.

"This deal signals our end-to-end commitment of integrated solutions to our customers," said Gaurav Dhillon, Informatica president and chief executive officer, to investors at a Web cast Friday morning. "We believe we have extremely expanded our market opportunity in the mainframe."

Many research companies claim mainframes are well-established with the bigger names in the business and are seeing something of a resurgence these days. According to market figures, 90 percent of Fortune 1000 companies still use mainframes because of their security.

Mainframes are still considered the de facto platform for mission-critical applications and initiatives like homeland defense, disaster recovery and fraud detection. The META Group said sales have increased 33 percent annually the past several years.

For years, Striva's research and development team has been working on improving the way data is gathered on the mainframe. According to Ted Friedman, principal analyst at Gartner, it's that technology which is most interesting to customers.

"Informatica will now have some interesting applications they can use," Friedman said. "(Striva) has nice data accessibility functions; most interesting is their change data capture ability to unobtrusively gather data in a real-time application."

The change data capture application is one of the first items of business with the newly merged company. It plans to expand change data capture technology outside the mainframe and into its existing customer base as an enhancement to its PowerCenter and PowerAnalyzer products. Informatica also plans to make those two applications available on the mainframe.

Informatica believes the acquisition will help in what it calls its leadership in adaptive data integration - a single infrastructure handling any type of data, onto and off any platform in any quantity.

Friedman expects a clean acquisition for the two companies -- given there is "zero product overlap" in the two companies -- though he was surprised at the $62 million figure, which he thought was quite a premium for Striva.

"What's going to happen to the management and sales force at Striva could cause some short-term "distractions," he said, especially in the management and sales force ranks. The research and development team would likely remain intact, he said.

"It will not be painless," Friedman said.

According to a spokesperson, Informatica "is not discussing this issue at this time."

Striva's customers, some of whom are Informatica competitors, will continue to receive an Informatica-branded service, Dhillon said. "Those partnerships will continue," he said, "(sales people) will continue to resell an Informatica product."

Officials expect the acquisition will result in a one-time charge in the third or fourth quarter, but expect to see $20 million in revenues from Striva next year.

The acquisition announcement Friday is a departure from Informatica's normal way of business. Friedman said the company usually forms partnerships with other companies featuring the technology they need, rather than buying them out.

Case in point: earlier this year, Informatica joined forces with webMethods to form BAM (business activity monitoring), an integration tool that provides "on-the-fly" access to business performance indicators.

Acquisition, he said, is a common practice with Informatica's chief competitor Ascential Software, which has been making headway in the business intelligence industry lately. He expects the acquisition was a way for Informatica to garner some word-of-mouth in the industry.

"There's been some inertia at Informatica lately," Friedman said. "This acquisition is a good way to generate buzz in the industry and maybe give them a boost and re-energize within the market."