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February 12, 2001 |
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B-To-B-Integration Vendors: Who's Taking It On The Chin?
By Alorie Gilbert (agilbert@cmp.com)
In the business-to-business-integration tools market, which companies have the goods and how well are they braced to withstand the economic blows?In one corner are the enterprise-application integration vendors--BEA Systems, Neon, SeeBeyond, Tibco, webMethods, Vitria Technology, and others--that have added XML capabilities to their offerings. In the other corner are B-to-B-only startups such as CommerceRoute and IPNet. Microsoft and IBM also are competing for what AMR Research projects will be a $570 million market this year.
As the growth of IT spending has slowed in the past few months, several rising stars have taken a bruising.
New Era of Networks (Neon) Inc., which at year's end introduced an XML integration product called Neon Process Server, reported a net loss of $39.3 million on $40.2 million in revenue for the fourth quarter. The $188 million company, which had been profitable, says it failed to cinch several key deals during the quarter. In a move to regain profitability, Neon has restructured. Analysts say the company, whose clients include Monsanto Co. and Lockheed Martin Corp., is struggling to manage a hodgepodge of products gained in acquisitions and a reseller relationship with IBM that has caused product overlap.
Vitria has also taken some hits. Fourth-quarter revenue declined to $40.8 million from $41.6 million in the previous quarter, and Vitria posted a $200,000 net loss, compared with a $1.4 million profit for the previous quarter. But annual revenue leaped from $31.5 million in 1999 to $134.7 million last year. With customers such as BellSouth, Qwest Communications International, and SBC Communications, Vitria has been hurt by the economic slowdown in telecom at the end of last year. "Its customer base has fallen on hard times and took Vitria along with them," says Tim Klasell, an analyst at Thomas Wiesel Partners. To diversify its client base, the company is developing versions of its BusinessWare integration platform--which supports integration using RosettaNet XML standards--for manufacturing, finance and insurance, and energy.
Mercator Software Inc. was embroiled in accounting problems last year. After failing to account for $2.4 million in expenses in the first half, Mercator had to adjust its net income and earnings per share for the first two quarters. The scandal derailed the company in the third quarter, causing revenue to slip to $32.2 million from $35.7 million the previous quarter. Mercator has since replaced its CEO and CFO and reorganized its sales, service, and development groups. The company, whose Mercator Commerce Broker product allows B-to-B integration via XML, expects to report $38 million in fourth-quarter revenue.
Not all contenders are on the ropes: SeeBeyond, Tibco, and webMethods exceeded Wall Street expectations for the fourth quarter; each reported a revenue increase of more than 30% over the previous quarter. The contrast between their fortunes and those of slower-growing rivals suggests that a scant few vendors eventually will dominate this market. "You're seeing a pretty brutal shakeout," says Prudential Securities analyst David Breiner. "There's a short list of vendors that are executing well."
Illustration by Gene Greif
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