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March 7, 2011

Compuware ready to spin out Covisint “next year”

Source says magic number is $80m trailing revenue

By Jason Stamper

Compuware is planning to spin out its vertical industry collaboration and B2B exchange division Covisint as early as next year, CBR has learned.

Application performance management firm Compuware acquired Covisint for an undisclosed sum in February 2004. But Compuware is planning to carve out Covisint in an IPO once it hits trailing revenue of $80m, with current projections suggesting that should happen some time next year, according to a source close to the discussions.

Founded in 2000 by a consortium of organisations – General Motors, Ford and DaimlerChrysler – the firm was something of a dot-com proposition, promising improved collaboration, portals and private exchanges for companies’ partners and suppliers initially in the automotive industry but latterly healthcare, oil and gas and others.

Speaking to CBR, a source close to the discussions about the future of Covisint said: "We plan on doing an IPO carve out of Covisint once they hit $80m in trailing revenues, which should be about this time next year."

Our source said that Covisint is already an independent business unit with its own P&L, and is contributing positively to Compuware’s profitability. In this fiscal year Covisint is expected to achieve revenue growth of 34- to 35%, with growth next fiscal year anticipated to be as high as 40%.

But with Covisint having a different focus from Compuware, looking not at application performance management like its parent but collaboration, security and identity management in a few vertical industries, Compuware has clearly decided that it’s almost time to let Covisint have complete independence.

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Nevertheless, our source said that Compuware would continue to leverage Covisint’s technology in the mean time, including its portal technology and the analytics and decision support capabilities it garnered from the acquisition of DocSite in October 2010.

Covisint was founded in 2000 when some analysts believed that in the Internet era more and more companies would use online auctions to source their supplies. However the initial hype proved unjustified as the auctions proved unpopular with suppliers; Covisint sold the auction portion of its business to FreeMarkets in 2003 and focused instead on secure collaboration and portals. Today the firm claims its customers include 46 of the top 50 Fortune 500 companies and 12 of the top 20 most visited U.S. web sites.

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