If you believe the Inprise/Borland (Nasdaq: INPR) shareholders campaigning against their company's proposed acquisition by Corel (Nasdaq: CORL) deal, you'd think an ugly frog is devouring a radiant jewel.
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"Inprise management and the board of directors have sacrificed two of the best brand names, one of the best product portfolios, a phenomenal and loyal customer base and one of the most attractive balance sheets in the whole independent software vendor (ISV) industry," declares Inprise shareholder Don Magie on his extremely well-done Killthedeal.com pages.
Many Inprise shareholders have beaten the drum against this deal from the start. The anti-Corel faction gained traction last month when Inprise board member C. Robert Coates resigned as a director and announced his opposition to the merger.
Apparently Inprise itself is now rethinking things. Just a day after saying it expects the merger to close in the summer, Inprise now has asked its investment bank advisers to look at the terms again.
The re-evaluation shouldn't take long. Under current market conditions, this deal stinks for Inprise, because the price has plunged 65 percent since it was first announced. At the very least, Inprise ought to revisit the proposal and get a price collar.
Some of the Inprise opposition wants the merger off altogether, citing many of the same Corel criticisms leveled by market observers over the years, including bad management, shifting strategies and a generally poor image on Wall Street. Magie argues Inprise should get executive control before the deal goes through.
But is Inprise really that much better than Corel?
Inprise CEO Dale Fuller has done well sprucing up the company's balance sheet and getting closer to profitability. And he certainly doesn't attract the strong feelings generated by Corel head honcho Michael Cowpland.
Unfortunately, the key factor for Wall Street is growth, and Inprise has yet to demonstrate a strong uptick in its business. Yesterday the company reported a year-over-year revenue increase of 7 percent -- an improvement after years of sliding sales, but still not remotely close to a figure that would impress anyone. The market for application development tools simply isn't growing rapidly.
The company hopes Linux will accelerate business. But with other players such as Sun Microsystems (Nasdaq: SUNW) jumping into the tools market, Inprise will face the same type of competitive challenge that hurt it in the Windows world with Microsoft (Nasdaq: MSFT).
Executives for Inprise clearly believe they can't build scale on their own, or else they wouldn't have found a merger in the first place. The fact that Inprise ended up with Corel seems to indicate that management couldn't get a better buyer. That the deal included Inprise ceding CEO control of the combined company tells you executives didn't have much leverage in their negotiations.
So Corel might be the only thing out there, unless an Inprise shareholder can find a better option. But no one has come up with anything yet.
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"Why wouldn't Ticketmaster Online-CitySearch (Nasdaq: TMCS) ... spend about $150 million to buy CDNow (Nasdaq: CDNW), and buy all these customers?" Webmergers.com CEO Tim Miller asks.
Here's why not: because Ticketmaster Online doesn't need to "buy" them. If customer acquisition is all that mattered, a partnership with cross-promotion and shared links would work well enough. Most companies are bought for their entire business operations, not just their customer lists.
Miller notes that quality of traffic and the ability to make money do matter.
But even if unique visitors were all that mattered, there's another way for a solid company to pick up customers: let your weaker competitors go out of business, then scoop up the traffic yourself. That sounds like the cheapest method of all. 22GO>