March 2002
Ecometry founders to sell to
Syngistix
Smith, Gardners offer to take company private gets
topped by $2.4 million
Pledging their 35-percent stake in the company,
Ecometry founders Wilburn Smith and Allan Gardner are backing the $36
million sale of their publicly traded company to Syngistix. Company
officials now expect the deal will execute in the April or May time
frame, a sale that will bring $2.4 million more in cash than a prior
offer by the founders to take their company private.
The offer from Denver-based Syngistix tops a deal
that was on the table from the SG Merger Corp., formed by
Ecometrys founders, to pay $2.70 a share for the outstanding
shares. Syngistix is offering $2.90 per share.
The acquisition of the leading source of new HP 3000
sales during the past three years is not wrapped around that
platforms sales potential, however. Ecometrys CEO cited
the prospect of gaining its suitors alternative platform
experience as one of the chief motivations in the deal.
Syngistix, like Ecometry, originally offered
their software solutions on the HP 3000 platform, said John
Marrah in a letter to customers when the deal was announced in late
January. Like Ecometry, their products now feature flexible,
open, n-tier architecture and run in the Windows 2000 environment,
while Ecometry runs in the Windows 2000 and Unix
environments.
But there are reports from the field that
Ecometrys non-3000 implementations can use the help Syngistix
will provide. While about 25 companies have deployed the catalog and
e-commerce software on platforms other than the 3000, sources in the
community say performance has been an issue still to be solved. One
consultant said as recently as December the company was advising
prospects who wanted a Unix implementation to take A-Class HP 3000
installations first, and switch their systems to HP-UX later on. HP
continues to offer a free switch from MPE/iX to HP-UX systems if
customers own an A-Class or N-Class.
Ecometry CEO John Marrah denied the company was
advising prospects to install on HP 3000s first. He said that there
have been six installations of Ecometry so far this year, and five
have been implemented on platforms other than the 3000. Marrah said
the company is being sold to get an advantage of two firms working
together in similar sectors. Any edge that Syngistix might provide in
technology isnt the only motivation, he added.
They have some strong expertise in those areas,
but frankly were way down the pipe there, Marrah said.
We have a fully functional version of our product set on Unix
and NT today. You really have a choice.
The sale of the company is wrapped around the classic
efficiencies which any two merging firms hope to achieve in a merger,
he said.
Were about the same size companies. Our
view and the Syngistix view is that were all out there slugging
it in the marketplace and spending the same amount of dollars on
marketing sales and overhead. By combining, we can provide a much
better integrated product and come to market faster. Its a huge
technology boost, but its also a great operational boost. The
goal is to provide an end-to-end, seamless application, from
manufacture all the way to end-line customer.
Ecometry will be converting few of its existing HP
3000 customers to other platforms until the start of next year, he
added, after the customers busy holiday seasons. The company is
focused on building conversion routines that will give sites a way to
convert to another platform online, while production is underway on
their existing HP 3000s.
We have about 20 percent of our customers who
would do it this year, if we could provide that functionality,
Marrah said. But that would be a manual process this year, and
we wouldnt have the resources to put into that. We believe the
automated conversion is the right way to go.
At the same time the company is building conversion
routines, Marrah sits on the board of OpenMPE Inc., the organization
dedicated to prolonging the lifespan of MPE beyond HPs end of
2006 departure from the community. Jon Backus, chairman of the board
of directors of OpenMPE, said that the Ecometry sale looks like a
positive to thing to him.
Ecometry has been a strong, loyal advocation
vendor in the MPE space, Backus said. Despite the sale,
we look forward to that continuing.
Despite selling five of its six 2002 implementations
on Unix and NT, Marrah said that Ecometrys performance is about
half as fast for a non-3000 Ecometry implementation. But we
have lots of activities underway today [to resolve that], he
said. In a situation where we have a comparable box, we can
process about 50 percent as fast as on an MPE box. Were making
some changes in the database architecture to speed that up.
Ecometrys biggest change will be the
implementation of an n-tier architecture, which drives the software
into a decentralized computing environment. On MPE we ran the
application and the database and the listeners all on one box,
Marrah said. In the Unix and NT environments we can
decentralize those.
The companies have order processing engines and
customer service engines which overlap. But Marrah calls those
pieces of technology we can both share, and well be
looking at integrating those over time. Pushing customers into
using one solution or another isnt part of Ecometrys
plan, he added.
Leaning harder into new technology is not whats
caused the companys slowdown in sales and red ink over the last
two years, Marrah said. Ecometry sold 25 new installations last year,
and we dont know any of our competitors who sold more
than four, he explained. Our issue was that the retail
channel had a difficult year. Customers already had the systems to
allow them to function, so they werent upgrading.
Marrah expects the market to turn this year,
and that will turn us around. The company is projecting a
$2.7 million loss for 2002 before any income tax provisions,
according to SEC documents, based on estimated sales of $30.3
million. In the dot-com heyday the company booked $46.5 million in
1999 sales and posted $5.5 million in profits.
When the economy comes back we will have all of
our new technology, and our competitors wont have the cash we
had to invest during these challenging times, Marrah said.
In the meantime the CEO sits on the board of OpenMPE,
an organization dedicated to improving the technology that serves
more than 90 percent of its customer base. Marrah said its too
early to tell what prospects OpenMPE can offer for Ecometry
customers. But he added that if he was asked, hed tell HP to
offer an MPE license which would enable a hardware emulator to take
off.
We have a very strong customer base in that
platform, and if there is a way to provide a longer life for that
platform, it would be positive for our customers, Marrah said.
We want to make sure we stay very close to whats
happening in that OpenMPE arena.
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