In April this year, Platinum Technology chief executive Andrew ‘Flip’ Filipowski drew a line under what has been the most rampant acquisition program the software industry has ever seen. In the space of 30 months, the systems and data management software vendor executed a bold strategy to build itself into a mainstream software infrastructure management company, enacting 61 acquisitions (37 company take-overs and 24 product buy-outs). In terms of building a huge revenue base, the strategy worked like a dream. In 1994, Platinum was a niche database software utilities player with products that helped mainframe data administrators run their IBM DB2 databases. Revenues then were $95.8m. This year, with a vast array of tools, the company is heading towards $600m, up 38% from 1996s $439.2m. But the strategy has fallen down on other fronts. Filipowski has not halted the acquisition strategy by choice – he still maintains that users want to pick ‘point products’ from a single vendor to solve their myriad software problems.
But the charges Platinum has taken for its many acquisitions have clouded its net profit picture, and the company has failed to make an annual operating profit since 1993. The goal for the past couple of quarters has been to move the focus away from acquisition towards profitability. Having cut 10% of its staff and made other reductions, there is evidence that Platinum is making progress. In its latest quarter, net profits excluding restructuring and acquisition charges, amounted to $3.7m. There are plenty of highly-rated items within the 140 product portfolio. But despite efforts to bring some level of consistency by pulling them together using the Platinum Open Enterprise Management Solution (POEMS), they remain largely ‘point solutions’ – individual tools sold as suites and bundles. The best sellers are still in data management – products for monitoring and controlling DB2 data, Oracle, Informix and Sybase. In systems management, the line-up includes job, storage, security, distribution, asset, and resource management. And in application development, the company has high-level design tools, data analysis and repository software. In fact, Platinum has just been signed up to port and sell the Microsoft Repository for non-NT environments. But that ‘point product’ positioning has had a mixed reception. Customers have grown cautious of backing one player’s individual products while the industry’s major vendors, Computer Associates and IBM’s Tivoli unit, battle to outdo each other with framework environments designed to bring consistency and interoperability to the operation of their own and other vendors’ products. Platinum’s patchy financial profile made the company appear vulnerable to a take-over. But the market has warmed to the company of late. While the share price languished at around $15 only a couple of months ago, it is now in eager demand around the $24 level – valuing the company at around $1.5bn. But it will have to produce profits to justify its improved status amongst investors.
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