By William Fellows
Banyan Systems Inc is giving up on its traditional network software business and effectively handing its installed based to Microsoft Corp in return for the equivalent of $10m (CI No 3,573). As we reported, Microsoft is paying $10m for warrants enabling it to buy 7.5% of Banyan’s stock at $10 a share, while Banyan trains 500 of its employees on NT network services. Banyan’s share price, which jumped for joy on Monday’s news climbing around 25% to a 52-week high of $19.37, settled back to $15 and change when the implications of the deal became clear yesterday. Banyan and Microsoft will develop a range of interoperability, migration products and programs that will enable Banyan’s StreetTalk for NT directory, Vines network operating system, BeyondMail and Intelligent Messaging users to move over to Microsoft NT, Active Directory (currently at beta 2 and due in Windows 2000), Exchange and Outlook. Banyan wouldn’t say when it will actually stop shipping its products. The two companies will plan, design and implement – but not, it seems, develop – network software infrastructure for deploying ERP applications using Microsoft technologies. Banyan claims an installed based of 2 million for Beyond Mail and Intelligent messaging and half the Fortune 1000 companies as users. All of Banyan’s customers that have more than 1,000 users also run Windows NT. Banyan will even move over to using all Microsoft products – NT, Site Server, Exchange and Active Directory – internally. Banyan won’t actually sell Windows NT or other Microsoft products but will have around 1,000 employees in its network services division as a result of the agreement. It will eventually become a separate division. Going forward, the 15 year-old Banyan will have two main businesses, its internet directory services and network services. It doesn’t plan to change its name because it thinks that it has enough brand equity to see it through the transition. The internet business, Switchboard Inc, is a majority-owned subsidiary, and claims 117 million residential and business listings. The Microsoft deal is the second part of a two-stage plan to refocus that was set in motion by Bill Ferry who arrived as president and CEO from of Wang Laboratories’ $800m services division in February 1997. HarbourVest Partners invested $10m in March last year to get the strategy underway. Banyan earned $300,000 on revenues of $54.7m in its third quarter. Microsoft says it has shipped 20 million copies of Exchange in three years and outsold Lotus Notes by 700,000 copies in the first three quarters of 1998.
