The maker of enterprise resource planning software announced late yesterday that it is merging with San Diego-based software firm DataWorks.
The firms both make software that manages and automates internal business processes for small to medium-sized companies. However, DataWorks is much stronger in the manufacturing industry and Platinum is known for its core accounting software. Under the terms of the stock exchange, Platimum will issue 0.794 shares of its stock for every outstanding share of DataWorks stock.
"Looking ahead...we see an opportunity to accelerate our growth and build critical mass right in our own backyard," said George Klaus, chief executive of Irvine, California-based Platinum. "After looking at the sales and marketing strength we will have both domestically and internationally, plus the combined technical resources which include professional services and product research and development, we are creating a new organization that the competition is going to have to take very seriously."
And Platinum will need all the strength it can muster to hold off the competition, which includes huge players like the $3.6 billion German giant SAP, and other marquee names like Oracle, PeopleSoft, and Baan.
All the top companies in this arena have launched programs the past two years to attack the middle market, companies with revenue between $1 billion and $250 million. SAP has its ASAP program, PeopleSoft has PeopleSoft Select, and Oracle has Fast Forward.
The programs are designed to take much of the pain out of ERP implementations by slimming down the process and preconfiguring and preloading onto servers as much of the software as possible, keeping customization to a minimum.
But Platinum is well positioned to hold its ground. The firm is one of the top producers in the packaged application business.
For the first half of 1998, Platinum grew 81 percent from the previous year and had an 87 percent hike in license sales. This comes at time when the enterprise software market is generally slowing down and even powerhouses like SAP are expected to post lower growth than the past year's.
SAP, the first half of this year, grew 63 percent from last year's first half with license revenue growth at 62 percent. SAP executives said year-end growth will likely be in the 35 percent to 40 percent range.
Platinum has been slowly building its ERP product the past year from a base system of accounting applications. In the past year, Platinum acquired Clientele Software for front-office functionality including customer service support and sales force automation; and FocusSoft for a midmarket enterprise resource product for make-to-order and mass customization companies.
"Although neither of these companies was any more than a niche player prior to the acquisition, in combination with Platinum, the breadth of enterprise applications coverage is as good as any in the midmarket," AMR Research said in a recent report on Platinum.
But the one area in which Platinum could not compete is the manufacturing arena where companies like QAD, Symix, and DataWorks ruled. Until now.
With DataWorks under Platinum's wing as a wholly owned subsidiary, it has that last piece in place.
"Having a business model, including company-direct services and support, that is tuned to the specific needs of the midmarket is clearly a differentiating factor going forward," said DataWorks chief executive Stuart Clifton, who will become vice chairman and director of Platinum after the merger. "Also, because there is virtually no overlap within our respective large customer bases, we believe significant complimentary revenue opportunities exist for the combined company."
The merger is still subject to shareholder and federal regulatory approval. Some office and job consolidation is expected with the combined company having about 2,000 employees.