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The Big Blue Empire Retakes Ascential

A post on Ascential's fourth quarter financial analyst meeting has been in my backlog for a couple weeks, and now IBM made it a moot point. (If you were hiding in a closet somewhere and didn't hear, or if you don't pay attention to the ETL market, IBM re-acquired Ascential for $1.1B)

My original post was titled "Desperation at Ascential?" and had to do with their odd sales behavior during the fall of last year. They were heavily discounting deals, and I heard from several companies about offers that amounted to 100% discounts, selling based on license conversion and support costs only.

My initial reaction was that they were either desperate to make deals, or they were pushing for market share at the expense of margins. A third possibility offered up by a friend was that Ascential saw Informatica losing momentum, so Ascential was attempting to win deals on price and/or hurt Informatica's margins by driving down price. With the cash Ascential had in the bank, they could afford strategies like this, even if they might not play well with financial analysts concerned about margins.

My suspicion now is that they needed to make a threshold of new customers or market share as part of making the deal come off well prior to the IBM acquisition. We'll probably never know the truth. IBM has a way of making hostile takeovers look like agreeable buyouts to people who don't have good inside information.

The big question now is "what happens next?" Given IBM's abysmal track record in taking advantage of acquired technologies or keeping the product momentum, I don't hold out a lot of hope. Ascential was doing a terrific job of marketing, had the image of being the market leader, much needed product updates were in the works, and the financials looked decent.

My prediction is that they lose the momentum they had due to buyout turmoil, Informatica tried to pick up the slack, management at Ascential is disrupted while integrating with IBM management, and the products start to lag. Websphere has been IBM's focus for integration so we'll may see management of Ascential's products fall into that hole.

Maybe we'll all be lucky, and IBM will keep Ascential largely intact. People have said that about every company they acquire. Lotus Notes is the only product I can think of that's defied the curse of IBM acquisitions.

Update: I can't resist. The spellchecker wants to replace "buyouts". The question is, which sentence is better, the original:

We'll probably never know the truth. IBM has a way of making hostile takeovers look like agreeable buyouts to people who don't have good inside information.

Or the new spellchecked version?

We'll probably never know the truth. IBM has a way of making hostile takeovers look like agreeable buttocks to people who don't have good inside information.

Those with good inside information being proctologists, is my guess. What shareholder wouldn't jump at the chance to have agreeable buttocks for $18.50 per share?

Posted by Mark Monday, March 14, 2005 9:38:00 PM | permalink |