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April 4, 2004

Sybase issues profit warning and buys XcelleNet

Enterprise application infrastructure vendor Sybase Inc has issued a profit warning and invested $95.2m in a growth engine for the future with the acquisition of XcelleNet Inc, which offers software for remote device management.

By CBR Staff Writer

The company warned that total revenue for its first quarter to March 31 is likely be in the range of $183m to $185m, with pro forma earnings per share in the range of $0.18 to $0.20 while analysts had been looking for a figure of $0.24.

CEO John Chen blamed the failure to close several large telecom transactions but said that he expected these to close in future quarters.

Chen believed that the purchase of XcelleNet, which is to be integrated into its iAnywhere Solutions subsidiary, would give the company leadership in mobile database, mobile middleware and mobile and remote device management. He said it could now offer customers a full portfolio of applications for the management of their remote and mobile systems, from security to network connections and the devices themselves.

Sybase is buying Atlanta, Georgia-based XcelleNet from Francisco Partners, who paid $50m for the company when Sterling Commerce, who had bought it for $200m, decided the company was surplus to requirements in 2000. While XcelleNet had its roots in remote management of wired networks such as retail store chains, the surge in laptop sales has brought it increasingly into the mobile space.

The conjunction of the profit warning and the acquisition illustrate the two sides of Sybase. The company has been shrinking for the past five years as its core database revenue has shrunk in the face of the rise of Microsoft’s SQL server. Revenue of $963.2m in 2000 slid to $778m in 2003, though it hauled itself out of the red and recorded net income of $87.2m.

The iAnywhere operation offers the big hope for the future. According to Sybase’s last annual filing, iAnywhere was responsible for 21% of license revenue which puts it at a modest $57.7m. However it is operating in a dynamic market with annual growth estimates in the 30% to 45% range and the addition of XcelleNet, with a 2,200-strong customer base can only fuel growth.

Sybase may claim top spot with the spread of its software in this market but it is up against some formidable adversaries, led by IBM but with Microsoft and Oracle also offering competition.

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This article is based on material originally published by ComputerWire

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