2HRS2GO: Informix lost in the shuffle

COMMENTARY--This morning's news stories would have you believe the technology industry's latest billion-dollar deal is all about IBM.

Reuters, the Associated Press, Upside Today, Forbes, CBS MarketWatch, TheStreet.com, CNET (the publisher of ZDII) and the Wall Street Journal viewed Big Blue's $1 billion database software acquisition as another shot in the database war. By the way, there was another company involved, but apparently no one felt executives from Informix (Nasdaq: IFMX) were worth quoting.

Don't expect that to change anytime soon.

Oracle (Nasdaq: ORCL) won the first round of the database conflict in the early 1990s, putting Sybase (Nasdaq: SYBS) and Informix in the realm of near-irrelevance for most tech industry observers. Most of the attention paid to Informix in recent years came from lawsuits related to an accounting faux pas that forced the company to settle shareholder lawsuits for $142 million, and a patent infringement case filed by none other than...IBM.

(The companies say the IBM suit--and Informix's countersuit--will be dropped once the sale closes. Given that a $1 billion settlement was highly unlikely, to say the least, you can safely assume that the lawsuits had nothing to do with the acquisition.)

And just as in the past, analysts have relegated Informix to something approaching a cameo in today's drama. "OK, thanks for dropping the Informix Software database business. See you later. Maybe."

Certainly IBM isn't pretending to preserve Informix's database in perpetuity. Although IBM will support products from Informix Software for a while, the long-range plan revolves around Big Blue's own DB2 database product.

"The base for future development and significant enhancement for us will be DB2 universal database, and we will be integrating selected technologies from the Informix product suite," said Janet Perna, general manager of IBM's data management division. "If you are building significant new applications, we are going to encourage you to go to DB2."

IBM's big gain comes in the form of 100,000 loyal Informix customers. Meanwhile, the rest of Informix will take the name of its applications unit, Ascential, and concentrate entirely on the business of software for organizing and distributing information and analyzing business data online. Informix has been touting "information asset management" as a huge and largely untapped market.

At least now Informix's main competition is much smaller. Its chief rival in the field, Informatica (Nasdaq: INFA), last reported quarterly revenue of $54 million, or about one-fiftieth of Oracle's.

During this morning's conference call with analysts, Informix CEO Peter Gyenes noted that Ascential's sequential growth of 7 percent was higher than Informatica's 5 percent. But Ascential's year-over-year growth was better and came off a larger base.

Informix's playing field of choice is mostly potential so far. International Data Corp. and Gartner Group might predict an $18 billion market in a few years, but those are guesstimates at best. How many companies really need Media360 to organize their videos and photos? Or Axielle to distribute information? They're nice products, but they hardly seem as essential as, say, a relational database.

Ascential executives disagree, of course. In a telephone interview with ZDII, Ascential President Peter Fiore pointed out that with the Internet, companies' need to manage massive amounts of digital information more than ever.

And Ascential gets a big distribution network as a global partner of IBM, which should help boost revenue. But other than saying "lots," even Fiore couldn't provide an estimate of how many IBM customers want Ascential's products.

And whether or not Ascential turns out to be a goldmine hardly matters to investors today.

This isn't another bout of short-sighted, short-term thinking, because Informix shareholders have been suffering for years. Some hope emerged last year, when Informix announced its reorganization into a pair of distinct units; the implication for stockholders was that the company would find a way to squeeze value out of its database business.

The value turned out not to be much--a price tag worth slightly more than the unit's annual revenue. Executives probably couldn't get much more than that, given the slow death spiral of Informix's database business.

But the acquisition still looks cheap at roughly $2.66 per share for the subsidiary that generates 80 percent of revenue for a stock that closed yesterday at $7.04. You can see why IFMX shares have fallen more than 27 percent today. The surprise is that they haven't slid more, especially given the fact that not all of the $800 million in post-tax cash from the IBM sale will be returned to shareholders.

So investors are fleeing. Their company simply didn't turn out to be worth as much as they hoped. 22GO >