By Gary Flood
OK, we put our hands up: this is weird and wonderful rumor time, doubtless bound to prove to be nothing but the idle chatter of marketmongers, yet it’s still our job to shake the bushes on these things. Wall St was yesterday dallying with the notion that Computer Associates International Inc may be about to step in for Platinum Technology Inc, the company that’s vacuumed up what seems like a zillion small software product companies over the last couple of years in pursuit of an end-to-end database and systems management solution. Platinum, jack-of-all-trades and in some eyes master of none, has been trailing red ink for the last three quarters. Our spies were especially cruel about the reputed vapor-ish nature of the company’s POEMS (Platinum Open Enterprise Management System) architecture, the infrastructure glue loftily proclaimed by Platinum’s visionary president and CEO, Andrew Flip Filipowski. Over at its Illinois HQ, just outside the Windy City of Chicago, the company’s newly appointed (September) executive vice president of worldwide marketing, Sterling Software alumnus Michael Matthews, didn’t disappoint by doing the requisite spluttering and expostulation, craziest thing I ever heard, etc. Over our dead body; this is the sort of rumor CA puts out when we beat them at a big deal, summed up his reaction. We tend to believe him, but a balance-sheet based analysis does make an observer wonder how secure Flip’s house of cards really is. Sorting out Platinum Technology’s numbers must be an accountant’s wet dream – though admittedly we forbore asking its independent auditors, KPMG Peat Marwick in Chicago, how true that supposition is. Filipowski told his stockholders in the company’s last annual report that he had ordered 40 different business transactions in acquisitions in 1994 and 1996. Not all these deals have gone so far as whole company absorptions. Fujitsu’s UK-based subsidiary ICL, for example, had at one time flapped its gums to anyone in range that Access Manager, a single sign-on client-server security manager tool, based on technology originally supplied to the defense industry, would win it fame and recognition in the United States, a market the company has never made much impression in outside the Retail vertical sector. Lo and behold; on December 23rd, while the rest of us had other things on our minds, the company slipped it noiselessly into Flip’s back pocket for 2.2 million Platinum Technology shares. Platinum Technology has made, by its own Web home page’s reckoning, 22 complete buyouts so far (often via issuing its own stock to the mergers). After restating revenue due to these acquisitions, in fiscal 1995 the company was able to report sales of $275.9m, which was a huge improvement over the pre-gorged Platinum of 1994’s $95.8m. But restated, 1994’s sales were actually $202.5m, with net income of only $615,000 after special charges, and 1995’s were up to $275.9m, but with a net loss for the year of $112.m (operating loss was actually higher – $128.9m). That loss included pre-tax charges of $88.5m for acquired technology and $30.1m for other merger costs. Platinum Technology has continued to shoulder the burden of its ’94-’95 buying spree in its first three quarters of 1996. Revenues of $296.4m for the first nine months of its current fiscal were off-set by net losses of $38.0m, of which $15.4m were acquisition-related special charges. Wall St analysts surveyed by First Call do expect the company to report earnings of $0.13 per share when it reports its end-of- year figures on February 17th, but it’s still highly probable the company will have some remaining amortization of the spree to take out of any profits on its (possible) $400m 1996 revenue. Would a company that some see as a patchwork of smaller point- solution products vaguely strung together constitute an attractive buy? Perhaps if the buyer figured Flip had already done all the ground work for him. But it would have to be a behemoth of the size of CA to make a hostile move for the company, given that even at its ho-hum stock price yesterday of just over $17, down from its 52-week high of $18.75 but well up from the year low of $9.25, the company is now worth just under a billion dollars’ market capitalization (at 56 million shares outstanding). There again, perhaps a hard look at Platinum Technology would convince an observer that rather than follow Filipowski’s strategy of clumping together database and systems management, applications lifecycle, services, data warehousing and business intelligence lines of revenue, he could snap up one or two, say, of those streams? Envious third parties are said to be particularly fond of Platinum’s AutoSys job scheduling and job management software, for example. But it’s a stretch to see why Filipowski would be minded to off-load any or all of the over 60 database management products he now controls, say, let alone the 24 systems management ones, to take his two biggest product groupings, after going to all he trouble of collecting them. Unless, that is, the company’s shareholders finally balk at he persistent impact on the bottom line of the buy-in approach, and pressure him into stabilizing at a slightly lower size and with less overhead by slimming the portfolio down a tad. All in all, CA to buy Platinum Technology proves to be not too copper- bottomed a rumor, then. However, after strangling the CA-approach rumors, Matthews did tell us something noteworthy, and it concerned the notorious POEMS. Once touted as the answer to all the Platinum Technology product maiden’s prayers for integration, Matthews attempted to take the marketing foot off the pedal on its importance. POEMS is very poorly understood, which is probably our fault for not communicating properly, he stated. We should never have given the market the impression POEMS was a framework that would compete with other people’s. Instead, POEMS was all along meant to be positioned merely as the company’s internal integration approach, and hence should be of limited interest to outsiders, who are being sold complete Platinum products and solutions. Which will be news to many. The minor re-writing of history now explains the announcement last month that Platinum Technology had taken out a worldwide licensing, development and distribution agreement for IBM’s Tivoli TMF systems management framework, which had many of us furrowing our brows given its ostensible competitive nature. So Platinum Technology probably won’t be bought the next few weeks. A better question: has this pink mass of acquired companies wobbled down into a truly profitable synergized Jello? Let’s see on the 17th.