Middleware Brawl Erupts

Its getting very nasty in the middleware market.

As competition in the crowded space intensifies, vendors are stepping up their marketing efforts while slinging especially nasty barbs.

Executives at the companies describe pricing competition as heavy and are clamping down on expenses or cutting staff so they can get to profitability faster.

CrossWorlds Software is cutting staff by 7 percent and is reducing executives salaries by 10 percent. Mercator Software has cut its payroll by 21 percent. SilverStream Software has cut its work force by 11 percent and plans more cuts. WebMethods has announced a hiring freeze and has cut back on some trade shows.

Tension among vendors is evident in the snarky comments that executives from CrossWorlds, SeeBeyond Technology and webMethods have made about each others companies and other competitors in recent earnings calls.

Jim Demetriades, SeeBeyonds chairman and CEO, implied that webMethods and others are trying to undercut SeeBeyond with lowball pricing. Phillip Merrick, webMethods chairman, responded that SeeBeyond is using warrants to buy its stock and win recommendations from systems integrators.

Alfred Amoroso, president of CrossWorlds, said that he does not believe in doing business by using warrants to win business. In a swipe at Vitria Technology, Amoroso said his firm displaced Vitria in a failed implementation. A Vitria spokesman asked why CrossWorlds chief financial officer resigned at the end of 2000.

The warrants to buy SeeBeyond stock that Amoroso and Merrick referred to were issued to Accenture, Computer Science Corp. and Electronic Data Systems. SeeBeyond also gave General Motors warrants, but would not discuss that issue.

Merricks comments may have been provoked by Demetriades remarks about webMethods, but there also seems to be some effort to rein in SeeBeyond. Analysts said that there is a cockiness about the Monrovia, Calif., company, which has had very rapid growth after changing its name from Software Technologies last year and starting a new marketing campaign.

SeeBeyond executives predict the companys 2001 revenue will grow between 74 percent and 78 percent, to $200 million to $210 million. Thats much faster than other vendors predictions.

Iona Technologies was the only other vendor to raise its estimates for 2001, and it estimated a growth of almost 50 percent. Ionas stock was the only one of the group to rise steadily following the earnings calls. John McPeake, an analyst at Prudential Securities, said Ionas new Netfish Technologies eXtensible Markup Language product seems to be winning customer acceptance. He raised his estimates for the year from $205 million to $224 million.

“These guys are very competitive, and this has gotten vitriolic,” said Greg Speicher, securities analyst at Stifel, Nicolaus & Co. “There are few leaders, and the future winners are trying to establish their positions. They will . . . do anything to gain a foothold.”

Speicher said: “There is no doubt there is discounting going on,” adding its “a little above average.”