i2 Gets It Right
i2 Technologies has announced that it will acquire Rightworks,
the #3-#4 provider of e-procurement software, for 5.3 million shares
of i2 - call it $100+ million at this writing.
This is a great move for i2 and a great move for Rightworks. At
a pretty good price (call it 5 times revenues, where i2 now trades
for roughly 7 times revenues), i2 gets:
- Access to catalog technology that should supplement i2's already
strong content business.
- An e-procurement on-ramp that should help i2 sell its e-marketplace
software.
- Ability to round out its product offerings for the i2 Platinum
Partners, like Siemens, Caterpillar, and K-Mart.
There are negatives:
- The deal marks the nominal end of a marketing alliance between
i2, Ariba, and IBM. This hurts i2 with the street, but the street
is easy to convince that it's wrong. As a practical matter, IBM
will continue to sell with i2, and i2 now thinks it can get access
to deals that used to go to Ariba without a fight.
- i2 and Rightworks had similar technology specialties, so much
of what i2 is buying overlaps with what i2 is already developing.
- The Rightworks e-procurement product is arguably a better product
than Ariba Buy, but it doesn't demo as well because of its interface.
- The acquisition brings more chaos to a company (RW) that was
beginning to stablilize under CEO Mary Coleman and President Jeff
Carr, both of whom, it is rumored, will be leaving.
Short-term, the buy should be revenue neutral, relative to a continued
Ariba partnership within 6 months of the completion of the deal
in July. Expect that i2 will start selling Rightworks hard almost
immediately and that a few of i2's platinum customers will bite.
The acquisition will not be earnings neutral, unless i2 loses
many of Rightworks 350 employees.
The big benefit is long term. i2 can now go to market with its
own on-ramp, and this will earn it many an invitation from companies
that want to get their e-feet wet. Compared with Ariba, i2 has a
better e-marketplace, a more robust, but uglier on-ramp, better
commerce services, and more ability to manage direct procurement,
where the real money is.
But Ariba is not really i2's target. They believe (and we concur)
that over time e-marketplace technology will render enterprise-centric
application backbones obsolete. They want to be the leaders as that
happens. We agree with i2, and we think this move will help.
For other Short Takes, see our archive.
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