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March 20, 2000

Epiphany Buys Its Way Into Front-Office Management
Vendor acquires octane software, becomes strong competitor with web-based CRM package

By Jeff Sweat

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piphany Inc. is out to make its presence felt in the front-office market-and it isn't concerned about subtlety. The company bought its way into customer-relationship management last week with a $3.18 billion stock purchase of CRM vendor Octane Software Inc.

Epiphany has been rapidly expanding its product suite beyond its roots in marketing automation and customer analysis. It began that effort last year by acquiring personalization vendor RightPoint Inc. The purchase of Octane puts Epiphany in contention with more-traditional CRM vendors such as Clarify Inc. and Siebel Systems Inc., although Epiphany will shy away from Siebel's stronghold in sales-force automation.

"There's no percentage for us to go after in the sales-force automation world," says Roger Siboni, Epiphany's CEO. Siboni says Epiphany, with its focus on analytics and gathering customer data, will be a strong competitor to companies such as Kana Communications Inc., which just strengthened its own CRM portfolio with the purchase of SilkNet Inc.

Epiphany paid 12.8 million shares of stock for Octane, which had revenue of $3 million last year and was a month away from an initial public offering. "That's pretty big for a company that a lot of people hadn't heard of," says Robert Mirani, an analyst at the Yankee Group.

But Mirani says Octane has a solid Web-based CRM package, making it almost worth the price. "From a quality standpoint, Epiphany's not just buying hot air," he says. Wall Street didn't approve, though; Epiphany's stock plunged $40.94 to $208 when it revealed its purchase on March 15.

Prospective Epiphany users say the acquisition is a good move. "Epiphany is really well-positioned from the analytics side, and this offers them a whole new dimension," says Bill Crager, managing director of Rittenhouse Financial Services Inc. The Radnor, Pa., brokerage is evaluating Epiphany for customer analysis and marketing-campaign management.

Epiphany and Octane, located just half a mile apart from each other in San Mateo, Calif., hope to complete the merger by June. They plan to offer an integrated product suite by the end of September.

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