Divine Wants to Be a Net Powerhouse
Open Market Inc., an e-commerce pioneer and the holder of patents for the Web shopping cart and online credit card processing, will soon be absorbed into Divine Inc., an Internet holding company turned burgeoning e-business software vendor.
Chicago-based Divine is establishing itself as a force in the so-called extended enterprise space to integrate customer data with internal data and share information with partners and suppliers.
"We want to offer not only the technologies that do collaboration, interaction and knowledge management but also have the know-how of professional services to deliver those solutions and manage those applications," said CEO Andrew "Flip" Filipowski.
"Theyre all applications that affect the top line," Filipowski said.
Divine was formed two years ago as Divine InterVentures Inc. after Filipowski sold his previous company, Platinum Technology International Inc., which had bought more than 70 companies. Divine InterVentures originally set out to form a network of startup companies that it had invested in, all centered on business-to-business e-commerce. As the high-tech market soured and stock prices plummeted, the company shortened its name and began to buy companies at fire-sale prices.
Indeed, some industry watchers say they believe Divine got Open Market for a bargain in a stock swap valued at a little less than $60 million.
Open Market, of Burlington, Mass., was down to just $9 million in cash at the close of the last quarter, June 30, though it had a still-untapped $40 million credit line, said Joe Alwan, the companys senior vice president of worldwide marketing.
Open Market had repositioned itself as a content management provider with the March launch of Content Server Enterprise Edition, abandoning future development of its core Transact product for order and transaction management and divesting itself of its ShopSite e-commerce offering.
But Open Markets content management business didnt grow fast enough to make up for the sudden drop in e-commerce software revenues. For the first six months of this year, Open Market recorded revenues of $26.9 million, compared with $51.3 million in the same period a year ago. It recorded losses of $15 million through the first half of the year.
As for the rest of Divine, Filipowski plans more acquisitions, particularly in the services area. "Theres only a few steps left in the product areas," Filipowski said. "We had no more than a dozen mapped, but I dont think there will ever be a time when anything will be completed. Were looking to expand professional services and looking for additional found items in managed applications."
Filipowski seems to have more of a focused strategy this time around than when he built Platinum. He said he also has a clearer vision of where the acquired companies will fit with the new company, something that often took months to determine at Platinum, which had applications in a number of areas, including data warehousing and analysis, database performance, metadata management, and systems and network management.
Platinum had nearly $1 billion in revenues but had recorded net losses for five years straight when Computer Associates International Inc. bought it in June 1999. Still, CA paid a staggering $3.5 billion in cash for the company.
Open Market software user Brian Whitehead was encouraged that the company had been bought but said that its financial position was still short of where he would like to see it.
Whitehead, vice president and chief technical architect at the Standard & Poors division of The McGraw-Hill Cos., said Divine could bring some partnership opportunities to his own company, which could provide content for Divines portal offerings. But he has some reservations about Divine as well.
"Theres some concern as to whether theyll truly integrate their products. With Platinum, they never really did," said Whitehead, in New York. He is also waiting to see if Divine will be more than just an Internet holding company. "Im aware of Flips track record," he said.
All the applications Divine has acquired to date are built on the Java 2 Enterprise Edition application framework and .Net, which should make integration of the different applications easier, Filipowski said.
Filipowski said he doesnt expect other companies that started out as venture capitals to take Divines approach. Still, he said what his company is doing is hardly new. "There were 22,000 car companies; now theres three. There were 500 PC companies; now theres five. This is a continuation of what happens in every economic cycle on the downside of the market," Filipowski said. "Its what the Vanderbilts did with the railroads, the Rockefellers with oil, the Morgans with the financial industry."