Saturday, 13 April 2013

A bad time for mainframes?

It seems that nowadays is not a good time to be in the world of mainframes, with BMC Software likely to be taken over, Compuware recording a loss, and to add insult to injury, Oracle is talking about releasing a mainframe!

So let’s start with BMC Software, which got its name from its founders back in the early 1980s – Scott Boulette, John Moores, and Dan Cloer. BMC, notably, bought Boole & Babbage at the end of the 1990s and shortly after acquired CONTROL-M and its company, New Dimension Software. But those heady days must seem a long time ago because on 22 April it’s expected to receive final takeover bids.

Elliott Management owns a 9.6 percent stake in BMC, and signed a standstill agreement with BMC last summer, but that ended on 6 April. So they could bid for BMC or nominate directors to its board. People who know about these things are saying that buyout firm Thoma Bravo has joined a bidding group led by KKR & Co LP and TPG Capital LP in order to bid. Their likely rivals are a team comprising Bain Capital LLC and Golden Gate Capital. You can assume people are arranging to have access to large pots of money on the day. Bids are likely to be between $40 and $50 a share. We’ll be watching to see what happens, and, more importantly, what the impact is on users of their mainframe software.

Compuware is probably most famous for its Abend-AID product, which first saw the light of day in the 1970s. In the 1980s, they launched File-AID. Compuware recently reported disappointing fourth-quarter results and said its total year-on-year revenue is expected to drop from $1 billion to between $942 million and $946 million for the fiscal year ending 31 March.

CEO Robert Paul has increased his planned cost-cutting to between $80 million and $100 million over the next two years. (It was $60 million over three years.) A natural consequence of this could be layoffs – and that could impact on the quality of the software mainframe users can get hold of, or may mean longer delays between upgrades.

Interestingly, Elliott Management (see above) is Compuware’s second-largest shareholder, owning 8.7% of the stock. In January, their takeover bid of $2.3 billion ($11-per-share) was rejected by the board. Meanwhile, Sandell Asset Management, which holds 2.8% of Compuware stock, is urging the board to sell the company to the highest bidder as quickly as possible.

And while these mainframe companies are facing financial difficulties, Larry Ellison has launched, what he’s calling, a mainframe-class machine – arguing that any mission-critical app that runs on any Unix system will run better on the new Sparc T5 and M5 servers. In addition, Oracle is claiming that it has passed IBM on integer throughput performance – but that’s compared against IBM Power series.

The big news over at CA Technologies is that CA has filed a patent infringement suit against AppDynamics, which was started by one of its ex-employees. CA got hold of the patents when it bought Wily Technology in 2006. The ex-employee led the design and architecture for several Wily products. You may also remember that last November CA sued New Relic Inc for patent infringements. Again, the founder of New Relic had been a senior executive at Wily.

At least IBM seems to be doing OK. It's just released a $1 billion plan to construct and check Flash technology for enterprise solutions. The  technology should assist firms coping with Big Data challenges. The people at UBS have upgraded IBM from ‘neutral’ to ‘buy’, saying IBM has the best strategy of its peers in what it terms the “IT as a service” industry. Plus a new Synergy Research Group study shows that IBM’s share of the cloud infrastructure equipment market has hit a two-year high in the fourth quarter of 2012, reaching just over 19 percent.


Anonymous said...

well Researched and well wrote !!

RussEgeland said...

Good summary and insight into the rapidly changing world of Mainframe support programs that nearly all Global 1000 companies depend upon.