Feeds

Micro Focus snags Relativity for $9.7m

Mainframe marriage

Boost IT visibility and business value

Consolidation in the legacy application rehosting and modernization software space continues apace, with compiler and rehosting expert Micro Focus announcing yet another acquisition. This time, it's shelling out $9.7m in cash to pick up Relativity Technologies, one of its competitors in the IBM mainframe and midrange server spaces.

After struggling a few years back, Micro Focus has done what its name suggests, focusing not just on improving its products but on acquiring a lot of its competition and locking up the COBOL market as much as a software company that doesn't have its own mainframe or midrange gear can.

In July of this year, Micro Focus paid $5m to acquire Liant, the maker of the RM/COBOL compiler and related tools and the Open PL/I compiler. In May, Micro Focus forked over $73.3m to acquire NetManage, a maker of legacy application modernization tools that Rocket Software tried to buy at the end of 2007 but could not because it could not raise the capital to close the $69m deal.

Because NetManage was sitting on $25.4m in cash, Micro Focus was able to pick up NetManage for about $48m, and the company has a maintenance revenue stream of about $22m a year, so this was a pretty sweet acquisition for Micro Focus. Perhaps not as good as Acucorp, a rival COBOL compiler and tool maker, which Micro Focus acquired in May 2007 for $40.7m.

Micro Focus is a publicly traded company, with its shared traded on the London Stock Exchange and is a component of the FTSE 250 index. The company nonetheless reports its financials in U.S. dollars. In the prior fiscal year ended April 2008, the company reported sales up 33 per cent to $228.2m, with about half of that growth coming organically and half from acquisitions. The company generated $96.2m in cash from continuing operations and had most of that available as cash to make deals.

In early November, the company wanted to make sure everyone knew that Micro Focus was weathering the economic storm and said that it expected sales in the first half of fiscal 2009 (through October 31) in the neighborhood of $135m, which represents about 11 per cent of organic growth not including the effects of acquisitions. The company reports its official financial results for the second quarter tomorrow.

Relativity has over 400 customers using its Modernization Workbench tools to update COBOL, PL/I, and RPG applications and make them Web friendly and to integrate them with other applications. Before the acquisition binge at Micro Focus started, the company claimed to have 15,000 customers and over 1 million licenses, and despite acquisitions that have added many thousands of customers, these are still the stats that Micro Focus cites about itself.

The acquisition, which has been approved by the companies of both boards, is expected to close before December finishes, and Micro Focus said in a statement that ignoring amortization of intangible assets and one-time integration and restructuring charges, the Relativity acquisition will enhance its earnings, not diminish them. The company's did not say what the revenue stream is at Relativity, or how large its profits were. Nor have the two said anything about what will happen to Relativity's 100 employees or how the Modernization Workbench will be integrated into the Micro Focus product line.

According to a report in the Raleigh, North Carolina Triangle Business Journal, you can chalk this one up to the economic meltdown. As it turns out, Relativity has a lot of venture backers, including Wachovia Strategic Ventures (the venture arm of the troubled North Carolina bank based in Charlotte that is in the process of being eaten by Wells Fargo). Intel, CEC, Noro Moseley Partners, Sojitz, Tall Oaks Capital Partners, and Wakefield Group have also kicked in dough to help Relativity build up its business.

The TBJ report cites Stephen Maysonave, the company's chief executive officer, saying that Wachovia could not lead another round of financing, which was needed by Relativity, and with the economic downturn here in the States and spreading in Europe, the company was caught in a squeeze. Relativity gets about half of its sales from financial services firms looking to modernize their apps, so when the economic meltdown hit, the company was hit disproportionately harder than many other software companies have been.

Niches are great when times are good, and they can be very limiting when something goes awry in that niche. ®

Build a business case: developing custom apps

More from The Register

next story
Video of US journalist 'beheading' pulled from social media
Yanked footage featured British-accented attacker and US journo James Foley
Microsoft exits climate denier lobby group
ALEC will have to do without Redmond, it seems
Caught red-handed: UK cops, PCSOs, specials behaving badly… on social media
No Mr Fuzz, don't ask a crime victim to be your pal on Facebook
Barnes & Noble: Swallow a Samsung Nook tablet, please ... pretty please
Novelslab finally on sale with ($199 - $20) price tag
Ballmer leaves Microsoft board to spend more time with his b-balls
From Clippy to Clippers: Hi, I see you're running an NBA team now ...
Kate Bush: Don't make me HAVE CONTACT with your iPHONE
Can't face sea of wobbling fondle implements. What happened to lighters, eh?
Amazon takes swipe at PayPal, Square with card reader for mobes
Etailer plans to undercut rivals with low transaction fee offer
Assange™: Hey world, I'M STILL HERE, ignore that Snowden guy
Press conference: ME ME ME ME ME ME ME (cont'd pg 94)
Call of Duty daddy considers launching own movie studio
Activision Blizzard might like quality control of a CoD film
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Top 10 endpoint backup mistakes
Avoid the ten endpoint backup mistakes to ensure that your critical corporate data is protected and end user productivity is improved.
Top 8 considerations to enable and simplify mobility
In this whitepaper learn how to successfully add mobile capabilities simply and cost effectively.
Rethinking backup and recovery in the modern data center
Combining intelligence, operational analytics, and automation to enable efficient, data-driven IT organizations using the HP ABR approach.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.