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Accounting for Sage's move on Tetra

It ain't over 'til the fat accountant sings

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Analysis Accounting software is a market that is often forgotten in the PC business. But it shouldn't be. It's very important to many dealers. So the proposed acquisition of Tetra by Sage is a significant event. But will this acquisition finally give Sage what it has always coveted - the prized jewel of the mid-range market. It remains to be seen. Perhaps a more interesting question -- and one we can probably answer without the aid of a crystal ball -- is why Sage has not made a move on Tetra before now? The straight answer of course is that Lynx Group had moved in -- prompting Sage to react, but there is more to it than that. Perhaps Sage did not know Tetra might be available. Perhaps it never thought of buying Tetra. But its bid is very enthusiastic at 305p per share -- 63 per cent higher than the share price on the day Tetra announced it was in bid talks with Lynx. But if you are looking for other reasons, the answers can be kind or cruel. Kindly, one can say that Sage has had reasonable success with its Line 100 (formerly Sovereign) mid-range product. And latterly that it had tried, but in the end not managed, to make the best of a bad lot out of the Multisoft CS development. The less generous view is that it never made anything really out of the old Sky product that became Sovereign, and latterly Line 100, and that it made a pig's ear out of what once promised to become a nice silk purse at Multisoft with the CS Financials product. With Sovereign, so the story goes, Sage had always struggled to make the product work under Windows and maintain its legacy at the same time. The question for the sceptics now is 'What will happen with Tetra?' Sage surely cannot fail with such a long-term and fairly consistent success story. It certainly should not, but committed Tetra users will be right to seek assurances. Most importantly they should ask Sage what it intends to do about bringing its European product lines together. Sage is maintaining three different products from three different companies. One in France, another in Germany and a share of one in Spain. It also has interests in the US, including the very successful State of the Art. But first, let's look at why Sage is buying Tetra and why it is buying it now. The bottom line here is that it wants the mid-range market, and it wants it really badly. It has the money and Tetra -- like most businesses - has its price. So it must have felt like the obvious thing to do. But why not buy it before? It would have made sense five years ago, let alone today. There was, of course, the Multisoft distraction. Sage snapped up Multisoft at a bargain price when it was in dire straits, hoping the new acquisition could be left to its own devices. However, that was not the way it worked out and by the time Sage lost its patience it was really too late. Finally Sage is having to pay a decent price to get into this coveted market. But still, why not earlier - it has always had enough money to make a move? This is where we come to the real reason, in my opinion, for the timing of the Tetra deal - Pegasus. Pegasus is the old adversary that Sage has never quite managed to kill off. In the past, Pegasus has been in deep trouble but Sage has never struck the killer blow. Two takeover bids have been launched, resisted and repelled. Pegasus is not for sale -- at least not to Sage! And while Pegasus has failed to make any really serious impact on Sage in the low-end of the market, over the last few years its Opera product has not helped Sage's mid-range prospects. Now, Pegasus is on the verge of releasing its MPower mid-range client-server system. How good this is at selling remains to be seen but for Sage to react in such a dramatic way, it must be reasonably impressive. If Sage can sort out the Tetra deal and revamp the branding, we can expect to see a massive publicity campaign and a dealer recruitment campaign to match it. But Sage will have to act swiftly if it is to achieve any sort of brand continuity with its existing ranges and secure any meaningful reseller support. It may do nothing -- just treading-water making life hard for Pegasus' MPower could be enough. Meanwhile, it can use CS/3 - Tetra's client-server product -- to eat MPower's lunch. But Sage still has to make all of this stick. That may not be as easy as it would seem to be at first; Tetra is successful, profitable and has some excellent products. There had even been talk of Tetra repositioning itself as an ERP vendor -- another twist in the tale for Sage. This is what one Tetra dealer said: 'It came as a bit of a shock to be honest. Now it's a waiting game to see what is going to come out of it. Sage don't have any experience in the ERP market.' But that might not matter, Tetra is not really an ERP product in its own right yet. It is still an accounting package with third-party add-ons bolted on to make it into an ERP system. Tetra is a good mid-range product but you have to do too much integration at the moment and that's a slight weakness. Sage with its additional resources may be able to make that more seamless. If Sage does not manage to reassure the Tetra faithful then they may start to gravitate upwards to the established ERP solutions or towards the other mid-range accounting solutions like Sun and Exchequer. Or, woe betide, towards MPower. ® Simon Meredith is a freelance journalist

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