Applicast Files for Bankruptcy

Applicast, a subsidiary of full-service ASP Agilera, announced yesterday that it filed for Chapter 11 protection under the U.S. Bankruptcy Code.

The Menlo Park, Calif.-based provider of SAP and Siebel Systems services was acquired by the Englewood, Colo.-based Agilera in December 2000 (see Applicast & Agilera to Merge.

Applicast attributed the bankruptcy filing to the “demise of many of its new economy customers regionalized in the Bay Area, as well as the current financial climate.” Agilera CEO Rob Unger elaborated, saying that at the time of the acquisition, Applicast had 24 clients, made up mostly of small, technology startups. “Eleven are left.”

Is the Applicast filing a harbinger of things to come for Agilera? Not necessarily. Rather than a sign of impending doom, Gartner analyst Ben Pring said he sees the bankruptcy filing as a logical result of a move that “didn’t pay off for Agilera.”
At the time of acquisition, Agilera was looking to broaden its application base and establish a stronger presence on the West Coast, Pring told ASPnews.

While the original merger with Applicast may not have been a good move for Agilera, Pring thinks yesterday’s action will likely prove to be a good business decision. “Rob knows what he’s doing; he’s very pragmatic,” Pring told ASPnews. Unger was named CEO in March 2001 (see Agilera Names New CEO, Reorganizes.

Since Unger took over, Agilera has streamlined both its workforce and its number of application partners, laying off approximately a third of its employees and reducing its enterprise software partners from 14 to five. (see Agilera Sees Service Provider Market As Half-Full).

Yesterday’s Chapter 11 filing for Applicast will result in further streamlining. “In planning for 2002, we decided to move out of the SAP and Siebel business and to focus on where we have proven success — J.D. Edwards, Lawson, PeopleSoft, Oracle and Microsoft (for hosted Exchange).”

Unger added that the nature of bankruptcy is to allow for an orderly and smooth transition for Applicast customers and employees. That is, Applicast is restructuring its finances, but it will not emerge from Chapter 11 as an on-going business.

Gartner’s Pring says that Agilera isn’t tying itself to a traditional ASP model. “It’s aligning itself with key applications and is more of a traditional outsourcer.” Pring compares Agilera’s approach to that of ManagedOps and AppShop, two companies that have enjoyed success focusing exclusively on hosted Microsoft Great Plains and Oracle applications, respectively.

“Agilera is not looking to change the world, but rather work with companies to overcome the frailties and problems of the existing world,” Pring said.

Because Agilera is a privately held company, it’s difficult to know if the Applicast Chapter 11 filing is a symptom of the parent company’s financial health. What may prove more significant than its current balance sheet is how Agilera fits in the big picture with Verio, a Web hosting giant and one of three major investors in Agilera (along with CIBER Inc. and Centennial Ventures).

Unger said that Agilera and Verio have complementary core competencies, which the companies “try to leverage to bring each other business.” Unger wouldn’t speculate on the future of the relationship. “Today, that’s where it ends,” he said.

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