Ascential Software Corp.'s planned acquisition of Mercator Software Inc., a supplier of enterprise application integration software, is the company's biggest step yet to expand beyond its roots as a supplier of tools for building data warehouses. But is it wading too deeply into turbulent waters?

Earlier this week, Ascential said it's acquiring Mercator in a cash deal valued at $106 million. Combining Mercator with Ascential will create a company with annual sales of approximately $250 million and more than 3,000 customers. Each company's board of directors has approved the deal, but Mercator stockholders have to tender their shares for Ascential's $3-per-share offer. Ascential expects to complete the buyout, which is also subject to regulatory approval, by the end of September.

Following its spin-off from faltering database vendor Informix in 2001, Ascential initially focused on marketing data extraction, transformation, and loading tools used for building data warehouses. More recently, the company has expanded into the broader data-integration market with software that helps users and applications tap into multiple, disparate data sources. Ascential has built up its product line through a series of acquisitions, including its 2002 purchases of Vality Technology Inc., a developer of data-cleansing software, and data-profiling software supplier Metagenix Inc.

Unlike data-integration tools, EAI is used to integrate applications to create a single business process such as a book-to-bill order-processing system. EAI tools are sold by a large number of vendors, including SeeBeyond Technology, Tibco Software, and webMethods, as well as by such industry heavyweights as IBM and BEA Systems. That's made the EAI space very competitive--and some vendors, including Mercator, have been struggling.

Ascential has no intention of competing directly in the EAI market, says marketing VP Mike Cassettari. Ascential sees the Mercator acquisition "as very much an extension of what we've been doing," he says. Ascential has technology partnerships with SeeBeyond and Tibco, and Cassettari says those will continue.

Mercator's software will add transaction-oriented data-integration capabilities to Ascential's product line, complementing the real-time data-integration software Ascential recently developed, Cassettari says. Mercator also has integration products for vertical markets such as financial services and health care. Ascential will likely provide details about how Mercator's software will be integrated with Ascential's product line at a user conference in late October.

"I think they understand that they are getting into a new [technology] category," Current Analysis analyst Shawn Willett says. One challenge Ascential will face is continuing Mercator's efforts to overhaul the proprietary technology at the core of Mercator's software. But, he adds, the combination of data- and application-integration tools will make Ascential more attractive to companies that are narrowing their IT vendor lists.