Daily Archives: August 4, 2006

Open Text Corporation to Acquire Hummingbird for US$489 Million

After tentatively accepting an earlier acquisition bid from an affiliate of Symphony Technology Group for US$26.75 per share, and rejecting a subsequent offer of $27.75 per share from Open Text, Hummingbird has unreservedly accepted a follow-on acquisition proposal from Open Text valued at $27.85 per share.

There was a question as to whether Hummingbird would cut a deal with its former rival Open Text, and concerns have been raised as to how well Hummingbird’s existing customers will be served should Open Text prevail in the bidding sweepstakes. We will find out soon enough, with Hummingbird saying today that its board of directors has unanimously approved the $489-million transaction, and that it has recommended that shareholders vote in favor of accepting the deal.

In a press release announcing the agreement, Hummingbird says the transaction represents a premium of 20.5% to Hummingbird’s shares on May 25, 2006, the day prior to Hummingbird’s announcement that it had agreed to be acquired by an affiliate of Symphony Technology Group for US$26.75 per share. The winning bid from Open Text provides a 4.1-percent premium over the Symphony offer.

In terminating the agreed arrangement with affiliates of Symphony, however, Hummingbird must pay a break-up fee of approximately US$11.7 million, which effectively narrows the gap between the final offer from Open Text and the proposal that Hummingbird originally accepted from Symphony.

Now attention will turn to decisions regarding the continuance, termination, and support of Hummingbird and Open Text products, as well as to potential restructuring and employee layoffs at the merged company.

Microsoft Courts Respect at Black Hat

In what classifies as Microsoft’s boldest statement yet regarding its growing confidence in its enhanced security practices, the company handed out 3,000 copies of a beta version of its forthcoming Vista version of Windows to attendees at this week’s Black Hat Briefings in Las Vegas.

Microsoft has gone through a security evolution that brought it pain, embarrassment, frustration, ridicule, and — now, at long last — a measure of respect, even from a hacking community that traditionally has shown mostly disdain toward the software giant and its ubiquitous products.

For Microsoft to step up as a Black Hat sponsor, to make serious technology presentations there (as opposed to thinly disguised marketing pitches), and to come to the proceedings with Vista copies in hand is an undeniable testament to the company’s commitment and determination to finally subdue the security bugbear.

It’s a signal that security mainstays — Symantec, McAfee, and Trend Micro foremost among them — should carefully consider. Yet again, Microsoft is sending an unambiguous message that is owning up to the responsibility to secure its own products rather than relying on third-party vendors to do the job on its behalf.

When you think about it, security should not have become the enormous standalone business it is today. Companies that build operating systems, applications, and online services should have done a better job developing secure code and protecting the integrity and reputations of their products. Microsoft was lax in that regard for years, but through radically reformed secure-coding practices and a string of relatively savvy security acquisitions, the company has made good on its promise to put security at the forefront of its priorities.

That’s a red flag for security vendors, which is why they have been scrambling — Symantec moving into enterprise storage with its big-bet Veritas acquisition, McAfee increasingly emphasizing its IPS and network admission control (NAC) products for midsize enterprises, and Trend aligning itself strategically with Cisco — to redefine themselves as Microsoft’s impending security juggernaut gathers velocity. 

It’s also why they will be more aggressive in their security-related criticisms of Microsoft and its products. In that vein, Symantec recently alleged that Microsoft’s rewritten network stack in a recent Vista of beta is less stable than the one in Windows XP. It’s worth keeping in mind, of course, that Symantec now is a Microsoft competitor and that Vista, unlike Windows XP, has not been commercially released.

Symantec will hope that Microsoft gets it wrong, but it is behaving as though Microsoft will get it right.

IBM Strategist Ponders Enterprise’s Future and IBM’s Role in It

At InfoWorld’s website, David L. Margulius writes of a lunch discussion he had recently with Drew Clark, the lead strategist at IBM’s Venture Capital Group in Silicon Valley.

It’s a short piece, and it doesn’t provide a lot of detail, but what’s there is intriguing. Apparently, Clark addressed worldwide VC trends, saying that most startups today seem commoditized from birth, that Web 2.0 is becoming Enterprise 2.0, that the flow of money into VC coffers apparently is continuing, but that increasing levels of VC investment are going into companies based in Asia.

These assertions, if true, could have serious repercussions, and not just in the VC community. Think, for example, about the implications of startups being commoditized at birth. What will that mean? Will competitive differentiation shift from technological factors, which are increasingly evanescent, and depend more on business relationships, branding, and channel development? Or will technology, particularly patents, become even more critical to success?

What about the metamorphosis of Web 2.0 into Enterprise 2.0? If that’s true, what does it mean for the dominant players in enterprise computing and networking — Microsoft, IBM, Oracle, SAP, HP, Cisco? What will it mean for upstarts from the Web 2.0 world, especially Google, as it begins to establish a foothold in software-as-service enterprise computing? How far can Enterprise 2.0 encroach on the domain of Enterprise 1.0? What are the business and technical limitations?

As for the VC world, the money tap remains open, but for how long? We know the VC industry, at least in North America, is coming to a crucial crossroads. Many of them are seeking refuge in Asia, hoping to ride a wave of growth in that continent that has dissipated, perhaps forever, in this one. How big a gravy train will Asia represent for VCs, and how can American VCs be sure that they won’t meet stiff indigenous competition, perhaps sooner rather than later, from a growing financial class in the countries where they seek new fortunes? Meanwhile, what happens to embattled startup companies in the USA as desperate VC companies increasingly shift their investment focus to other parts of the world?

Not many VCs demonstrate contrarian thinking — look at the herd-like investment mentality that created gluts of companies in optical networking, storage networking, and email security, to name a few market segments, in recent years — so a swarm of VCs heading to Asia in search of a easy, quick hits is not difficult to imagine.

IBM, for its part, seems to envision a future in which a Web-based marketplace for on-demand enterprise application services would run atop Web-based utility infrastructure — doubtless with the next generation of WebSphere playing that integral role. It’s all part of IBM objective, as Margulius writes and as IBM’s recent software acquisitions attest, to become a services company with the business profile, and attendant profit margins, of a product-based (software) company.

That’s IBM game: Wrapping a prodigious array of services around the software that it hopes will become indispensable to the next wave of enterprise computing.