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May 15, 1997updated 05 Sep 2016 12:58pm

DEVELOPMENT TOOLS MARKET STARTS TO CONSOLIDATE

By CBR Staff Writer

For many years, the mantra of Sterling Software Inc’s chief executive Sterling Williams has been to only acquire established companies and dominate the niche in which they operate. Its last major acquisition, 1994’s buy-out of Knowledgeware Inc, a sizeable but then-flagging supplier of large software design tools, dovetailed neatly with Sterling’s own business of mainframe systems software. Building on that deal, last month Texas-headquartered Sterling added the application development tools arm of near-neighbor Texas Instruments Inc to its portfolio for $165m in cash (CI No 3,145). In the past, Williams has boasted that when Sterling buys a company it does it better than anyone else. Bob McLendon, president of Texas Instruments Software, said he expects this merger to be no exception. When Sterling acquired Knowledgeware it inherited a hugely disturbed and disgruntled customer base which it set about winning over with substantial investment in the area. Even before the latest acquisition, that application development division has become one of the pillars of Sterling’s $439m revenue line. In 1996, the unit reported revenues of $109.8m, which is a quarter of Sterling’s total sales. Adding Texas Instruments Software’s $250m revenue stream, makes for a $360m tools business – putting Sterling in the world’s top five vendors in the sector. Following the acquisition, Texas Instruments Software announced the availability of its Composer 4 component-based development environment for IBM Corp’s MQSeries messaging middleware – which should prove lucrative. The divestment allows Texas Instruments to better focus on its core business of digital signal processing semiconductors. Other evidence that the tools market is consolidating also came from acquisitive Rational Software (CI No 3,144). In a $890m stock swap, it pounced on Pure Atria, a move that extends its coverage beyond application and design software to testing tools.

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