By Siobhan Kennedy
Sybase Inc upped its commitment to the financial services market yesterday with the purchase of finance web application firm, Home Financial Network, for $130m in cash and stock. As part of the announcement Sybase said it would combine HFN with its financial server business unit and spin the two entities off as a wholly- owned Sybase subsidiary.
The number of Sybase shares to be issued to HFN shareholders is based on an agreed evaluation of the privately held company of $130m. Sybase has also agreed to provide an additional $25m in capital to the new venture, as well as certain intellectual property and other assets.
Michon Schenck, president of the new, as yet unnamed company, told ComputerWire that the idea to buy HFN and spin off a new business arose from the launch of Sybase’s financial server product in June. Schenck said that Sybase has two versions of the product, one aimed at the business to consumer market (to enable banks and insurance companies etc to offer on-line services) and one for the securities market, for inter-institution trading and communications.
Our financial server is basically middleware, Schenck said, but after a while we realized that the retail institutions wanted more of an end to end offering, they didn’t want to have to piece together the difference bits of the puzzle for themselves. She added that the securities companies were more happy to stick with using Sybase as a middleware filler and to continue to develop custom-built applications of their own to fulfill their other e-commerce needs. So we decided to augment our product in the retail sector with a front-end offering and we started to look for a partner, which is when HFN came to light, she said.
HFN sells software that enables companies to build their web front ends, including the technology financial institutions need to enable their customers to interact with them over the internet. Sybase’s financial server sits behind that layer and powers those transactions, integrating with the back office ERP and legacy systems to enable customers to pull off data and information in real time.
The business to consumer market is quite literally exploding, Schenck said, adding that Sybase chose to set up the company to capitalize on that growth. It was worth $200m at the beginning of 1999 and it’s projected to be worth $2bn by next year.
The new company will concentrate on selling combined offerings of Sybase’s financial server and HFN front end tools into retail institutions, Schenck said, as well as continuing the sales into the securities market. As part of the deal, all HFN’s 130 employees will join the spin off alongside Sybase’s 40-strong financial unit. She said that some of the team will concentrate on sales but she will also have Sybase’s 1,000 strong financial direct and indirect sales force (who operate in 60 countries) at her disposal. In addition, Sybase will work to set up another financial services unit within its own organization, to replace the old one. The unit won’t sell the financial server product, rather it will concentrate on marketing and business development for all of Sybase’s products in the financial services sector.
Schenck said the new company’s immediate goal will be to look at ways of offering its financial software as an ASP offering. In addition, it will try to augment its securities market financial server with additional software and services. It will also look to extend its small business services, adding such functionality as improved cash management. Schenck wouldn’t say whether Sybase planned to follow the same spin-out strategy in each of its other main vertical markets – telecommunications, healthcare and public services – adding only that the new company was akin to Sybase’s first offering, and that others may or may not follow.
The spin off will have operations in six sites: Massachusetts, New York, Connecticut, Utah, Milpitis, California and Waterloo in Canada. Dan Schley, ex CEO of HFN, will become CEO of the new venture and Andy Bangser, CFO of HFN, will become the new CFO. รก
