April 24, 2001 9:20 AM PDT

IBM to purchase Informix unit for $1 billion

In a move intended to strengthen its database-software lineup against rivals Oracle and Microsoft, IBM said on Tuesday it has agreed to buy the database business of Informix for $1 billion in cash.

Big Blue said the purchase will strengthen its database technology. IBM says its database revenue grew 36 percent year to year in the first quarter of 2001.

The news sent shares of Informix skidding. By late morning, the stock was down $1.59 to $5.45, a drop of 22 percent. IBM was up $2.60 to $114.60.

IBM plans to integrate the Informix database-business operations and employees into its software data-management division under General Manager Janet Perna. IBM plans to market and sell Informix database products worldwide through a combined IBM and Informix sales force.

"This (acquisition) is important because database software is a growth area for IBM in future revenue and in our profitably. This effectively doubles our presence in the distributed database market," said Steve Mills, senior vice president of the software group at IBM.

"At first blush, this seems like a very smart way for IBM to continue (its) success in the database market," Merrill Lynch analyst Thomas Kraemer wrote in a research bulletin issued Tuesday morning. "We think this (acquisition) will make IBM more competitive in the open systems segment of the relation database market," Kraemer wrote.


Gartner analyst Betsy Burton says that to succeed, IBM management will need to be focused. Managers must quickly determine which Informix products to use and which to get rid of.

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Informix offers IBM a large number of customers, and established products running on Unix and Windows NT operating systems, according to Kraemer.

IBM executives maintain that the company does not plan to force Informix's customers to move to IBM's products. "DB2 will continue to be the foundation of IBM's database offerings, but IBM will continue to maintain Informix's product line. No customer will be forced to migrate to DB2," said Janet Perna, general manager of IBM's data management software.

Perna said IBM will be integrating Informix employees into IBM's sales, research and data management units.

After challenging market leader Oracle in the mid-1990s, Menlo Park, Calif.-based Informix fell on hard times.

Informix appeared to have its business in order after years of financial struggles, stringing together six consecutive quarters of revenue growth. However, by the second quarter in 2000 the company was again reporting losses.

Still, Informix maintained a reputation for solid database technology used in so-called data warehousing, business intelligence and transaction-handling systems. Informix claims its software is used by more than 100,000 customers, including phone companies Verizon and Deutsche Telekom, retailer Sears and airline-reservation system Sabre.

Informix plans to use the proceeds from the sale of its database unit to focus on asset-management software. Upon the closing of the IBM deal, Informix said it will change its name to Ascential Software. The two companies said on Tuesday they plan to jointly market and sell business-intelligence software.

 

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