was the right product mix, the right services strength and the right geographic
–Yogesh Gupta, Senior Vice
Product Strategy, Computer Associates Inc
The world’s third biggest independent
software vendor, Computer Associates Inc, or CA as it is better known, just got a little
bigger. In what is being touted as the world’s largest software acquisition for over
$3.5 billion, CA last month announced to take over Illinois-based $968-million Platinum
Technology International Inc. The deal does not notch up CA to number two, but makes it a
formidable player in the business software market. A couple of days after the takeover,
Yogesh Gupta, Senior Vice President of Product Strategy, spoke to Sanjay Gupta of
DATAQUEST over the phone from the $5.1-billion giant’s Islandia, New York,
Why has CA offered to purchase Platinum
Technology at three times its share price?
You see, what’s interesting is that if you look at Platinum’s share price about
nine months ago, it was $30–and we are offering $29.25 per share. So the day-to-day
prices of a company fluctuate for various reasons. We think that there are tremendous
synergies between Platinum and CA. There are mainly two areas where we see these
synergies. The first one is the product area itself. On both client server and mainframe
platforms, we offer complementary products which, to CA, is a tremendous benefit. If you
have two companies that offer similar products and you merge them, you may not be able to
get the combined revenues. But if they offer complementary products, then you can do it.
The second area is the services aspect. From practically nothing a year and a half ago, CA
has grown its services business to about 3,000 employees. What Platinum brings is an
additional 1,000 people in its services organization. This will move us closer to growing
our services business to $1 billion sometime next year.
There’s another reason [for acquiring
Platinum]. The company has a large presence outside North America. Actually, its services
organization is stronger in Europe and some of the Asian countries. So its strength
outside North America is also very attractive to us. So it was the right product mix, the
right services strength and the right geographic spread.
Would you elaborate more on the
complementary nature of your products, because both CA and Platinum essentially cater to
the same market segments?
It’s correct that we both cater to the same type of customer. But that’s
one of the benefits of having complementary products and going to the same customer,
because the same customer is likely to buy the other product from you as well. Both of us
help companies run their businesses more efficiently; however, the products themselves are
quite different. For example, Platinum offers products in the areas of knowledge
management, data warehousing, database administration, database modeling tools, life-cycle
management, application deployment etc. And these very much complement CA’s network
and system management offerings, database monitoring, e-commerce management and web
application management. So even though the customers have the same profile, they will be
looking at Platinum’s offerings even if they have CA products and vice versa. In
fact, if you look at it from the life-cycle of any application, Platinum’s products
come in the first half, having to do with designing, modeling, performance analysis and
testing of the application. While CA’s products like Unicenter are aimed at
efficiently running those applications, making sure that they work securely and reliably,
with high-availability and disaster-proof capabilities.
Your database, Jasmine, has not been
very successful in the market. Are you going to reengineer it with Platinum tools?
Today, Platinum sells all its tools, with tremendous success, to companies which are using
databases like Oracle and DB2. Does that mean Oracle and DB2 are not successful products?
The reality is that with a database, you need tools that help a database administrator do
his job well. The database administrator needs the tools to help him design the database
for his company, to administer the database, to do data backup and performance modeling
etc. And it doesn’t matter which database he has–he needs these tools. Platinum
has built a billion-dollar business primarily around database and application development
tools. These are tools which will be used not only by CA but also by companies which will
be using CA’s databases. They will even be used by companies using non-CA databases.
Does it mean CA’s increasing focus
on databases rather than services? About a year ago, CA was trying to acquire a large
services company but the deal did not come through.
There are two sides to CA’s business and they will continue to be so–the product
side and the services side. On the product side, this [the Platinum acquisition]
definitely helps us. On the services side, we get an additional 1,000 people at the end of
this acquisition, which is tremendous growth. There is no ‘either or’ for CA. It
has never been CA’s intent to be just a product company or a services company. We
also need to make sure that we continue to fill out more product areas as well.
Is CA looking at more such acquisitions
to fill the products vacuum?
See, the fun part of the technology business is that it is always evolving. Therefore, you
have to somehow create or acquire those new additional technologies to be able to offer
them to the customer. Who knows what’s going to happen three years from now? We are
doing our own technology development as well as looking at acquisitions.
When it comes to acquisitions, CA has
not had a very favorable rating either with the acquired company or with the media. Why is
that so and will the current takeover change the unfair guy perception of CA?
There are many factors that go into different types of acquisitions. I came to CA through
an acquisition [of Cullinet] in 1989. Sanjay Kumar, who is our President, came through an
acquisition in 1987…there are many people in CA who have come through acquisitions. And
all these acquisitions have been tremendously successful for CA and for CA customers. What
the media writes is not something that we can control.
Let me tell you why some of the perceptions
arise. When CA acquired Cullinet, it was on the verge of closing downit was unable
to pay its employees. Now what happened was that in order to keep the customers
happybecause they knew that the company was strugglingthe company made all
sorts of promises as long as the customers bought some software from it at that point of
time. When CA took over Cullinet, it didnt take on any new orders but tried to
deliver on the promises made to the existing customers. And it took CA two years to do
that. Cullinet was not around anymore. What some of those customers did was say that CA
had delayed the projects. But the reality is that Cullinet would never have completed
those projects, as it would not even have paid its employees if CA had not come to bail it
out. So what the media did was pick up some of those early reactions, which were negative.
The media never came back to those customers two years later to ask how they felt. Now,
with the Platinum acquisition, legally, we cant comment on what we are going to do
with the companys products for the next 60 days, until we become one company. This
gives our competition a great opportunity to play upon the fears of the customers.
But then, sometime back, why did
Platinum promise some customers to refund their money in case CA were to acquire it?
Those offers were made when CA acquired Legent three years ago. During that period of
uncertainty and doubt, Platinum played on the fears of these customers and made the
offers. If you realize, there were hardly any companies who took them up on that offer as
part of the contract. Now, we are talking to themin fact, Platinum is talking to
them and telling them why it did this. That is an interesting question to ask Platinum as
to how it is going to deal with those customers. The challenge here for CA is that we
cannot say anything for the next 60 days. And the competition will make hay out of it just
like they have done in the past. And the media will write about it because it is juicy