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Loosely Coupled weblog

Friday, July 30, 2004

Sellers and buyers

If Confluent was actively looking for buyers, does that change the significance of who considered the acquisition? This is an important question that's come out in feedback on our lead article this week, BEA weighed web services buy. By late January, Confluent had all but run out of funding and desperately needed to complete a deal. So it's not as if Confluent was fighting off the unwanted attentions of a gaggle of eager buyers; the company had been actively courting suitors for some time. And the ultimate buyer, Oblix, shared an investor with Confluent, although both parties denied this was a factor in closing the deal, as we reported in our February article, Beating a path from identity to services.

But the list of who the other potential buyers were is still an important piece of information that hasn't previously been in the public domain. Confluent approached other prospects in addition to the four we named; these four — BEA, SeeBeyond and Netegrity — were the ones that took time to discuss the proposition (although we don't know which if any of them besides Oblix went ahead and made a bid). That tells us something about the strategic thinking in those companies at that time: if they were at least willing to consider an acquisition, then it clearly hadn't been ruled out of their gameplan. Perhaps it has now; Netegrity goes on record in the article to say that acquisition "isn't a priority". Our editorial judgement was to lead on BEA's involvement in the discussions because the circumstantial evidence suggests acquisition is (and remains) a much bigger priority for BEA.

There's another point, though, that needs highlighting: it's the weaker companies that are getting bought. As we revealed in our February article, Confluent only had four live customers. Earlier acquisitions of Talking Blocks by Computer Associates and of Adjoin Solutions by HP similarly brought no more than a handful of live customers in either case. So when we report that big-name companies are looking at acquisitions of web services vendors, we don't mean to imply that the big guys are going to end up owning the territory. It simply reinforces the message that web services expertise and technologies are growing in value because they're becoming important mainstream assets, and big companies are making acquisitions in an effort to keep pace with the leaders.

So you won't find us using the word 'consolidation' to describe all this acquisition activity; that's a word that applies to shrinking markets (as when, for example Oracle tries to buy PeopleSoft). Here we're looking at a market that's expanding so fast, everyone wants to buy into it.

posted by Phil Wainewright 10:22 PM (GMT) | comments | link

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