IBM Deal Calms CrossWorlds' UsersIBM Deal Calms CrossWorlds' Users

IBM's $129 million acquisition of CrossWorlds Software Inc. should reassure customers about the smaller vendor's long-term direction while boosting IBM's application-integration capabilities. The companies said last week that IBM would absorb CrossWorlds' 350 employees and its integration technology for linking enterprise systems such as enterprise resource planning and customer-relationship management.

Consolidation in the integration software market is commonplace, with competitors such as New Era of Networks Inc. and Active Software Inc. being acquired by Sybase Inc. and webMethods Inc., respectively, in the past few months. Acquisitions make business customers nervous because they put a cloud of uncertainty over the future of the software they've invested in.

However, Amy Hedrick, an AMR Research analyst, says she expects IBM to absorb CrossWorlds' technology with minimal impact on the smaller vendor's customers. At the same time, these customers will get access to IBM's extensive catalog of products and services. There's a fair amount of concern right now about the viability of small vendors, she says. IBM's acquisition removes that worry for CrossWorlds' customers.

CrossWorlds' technology eventually will become part of the WebSphere suite of E-business infrastructure applications, says Paraic Sweeney, VP of marketing for IBM's software group. CrossWorlds' tools are used in the manufacturing, telecom, and financial-services industries.

IBM needed CrossWorlds' application adapters, according to Gartner analyst Yefim Natis; he terms the adapters the most difficult part of the integration picture.

IBM and CrossWorlds had been partners for four years, with CrossWorlds building connectors to IBM products such as MQSeries messaging middleware and WebSphere. However, the companies didn't co-sell the products. "While we were partners and potentially could co-sell to customers jointly, in fact we didn't merge and combine development, resources, and road maps," says Alfred Amoroso, CrossWorlds' CEO, who will join IBM in a position yet to be determined.

CrossWorlds also reported last week that it had reached profitability for the first time since going public in June 2000. Revenue for the third quarter ending Sept. 30 was $21.7 million, a 44% increase over the $15.1 million reported during the same period a year ago. Pro forma net income, excluding restructuring charges and noncash charges for deferred stock-based compensation, was $900,000, or 3 cents per share, compared with a loss of $7.2 million, or 28 cents a share, a year ago.

In July, company executives had said they expected CrossWorlds to be profitable in the fourth quarter.