Andy on Enterprise Software

Gazing Behind the Data Mirror

July 18, 2007

I have been digging a little deeper into the Data Mirror purchase by IBM that I wrote about yesterday.

It’s a good deal for IBM, and not only because the price was quite fair. With its Ascential acquisition IBM positioned itself directly against Informatica, yet Ascential’s technology did not have the serious real-time replication that is important for the future of ETL, and this is what Data Mirror does have. DataMirror gives IBM a working product with heterogeneous data source support in real time, giving IBM an important piece in the puzzle to achieve their vision for real-time operational BI and event-awareness.

A bigger question is whether IBM fully understands what it has bought and whether it will properly exploit it. Data Mirror’s strengths were modest pricing, low-impact installation, neutrality of sources it supports and performance doing this (via its log-scraping abilities and speed of applying changes). IBM must keep their eye on the development ball to ensure these aspects of the DataMirror technology are continued if it is to really exploit its purchase. For example, on the last point, the partnerships DataMirror has with Teradata and Netezza and Oracle should be continued, despite the obviously temptation to snub rivals Oracle and Teradata.

Any acquisition creates uncertainty amongst staff, and IBM needs to move beyond motherhood reassurance to show staff that it understands the DataMirror technology and business and wants to see it thrive and grow. It needs to explain how the DataMirror technology fits within a broader vision for real-time integration in combination with traditional batch oriented ETL, business intelligence and enterprise service bus (not just MQSeries) integration or else the critical technical and visionary people will dust off their resumes and start looking elsewhere.

I gather that IBM has already announced an internal town hall meeting next week, at which it needs to convince key technical staff that they have a bright future within the IBM family. I also hear that no hiring freeze has been imposed, which implies they are making the decision of growing the business, which should reassure people. IBM is an experienced company which will recognise that the true IP of a company is not in libraries of code but in the heads of a limited number of individuals, and no doubt will recognise the need to retain and motivate critical staff. It used to be poor at this (think about the brilliant technology it acquired when it bought Metaphor many years ago, but bungled the follow-up) but has got smarter in recent years e.g. I hear from DWL people that they have been treated well.

Hopefully IBM’s more recent and happier acquisition experiences will be the case here.

2 comments so far

[…] So, bearing this in mind, what would be a valuation? Well, solid companies like Datamirror are changing hands for 3x revenue or so, though these are companies with merely steady growth rather than the turbo-charged growth demonstrated by Netezza. So suppose we skip the pesky profitability question, accept this is a premium company and went for five times revenues? This would lead to a valuation of $400M on trailing revenues, maybe $500M on this year’s likely revenues. Yet the offer price of the shares implies a market cap of $621M, virtually eight time trailing revenues, and six times likely forward revenues. […]

Hi Andy, I’m handling the analyst relations for the DataMirror acquistion from IBM. Let me know if you’d like to chat with any of my spokespeople.



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