IBM To Buy Bowstreet, Progress Snaps Up Neon - InformationWeek

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12/20/2005
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IBM To Buy Bowstreet, Progress Snaps Up Neon

Progress, which specializes in software-development tools, paid about $68 million for Neon Systems, a mainframe systems integrator. For its part, IBM revealed the acquisition of Bowstreet early Tuesday and is scheduled to discuss the deal in more depth later in the day.

The software world continued its path to consolidation Tuesday with news that IBM plans to buy ISV partner Bowstreet and Progress Software has purchased NEON Systems.

Progress, a Bedford, Mass.-based company specializing in software development tools, data management and Web services tools, said it tendered about $6.20 per share for Sugar Land, Texas-based NEON Systems, a longtime expert in integrating mainframe solutions. The deal was valued at about $68 million, the companies said Tuesday morning.

Plans call for NEON to become part of Progress' DataDirect unit. Progress bought DataDirect last year.

IBM announced its acquisition of Bowstreet early Tuesday as well and is slated to discuss the deal later in the day. Terms of the agreement weren’t disclosed. Bowstreet, Tewksbury, Mass., has been a longtime collaboration partner with IBM Software, which is making a habit of buying ISV partners. In July, the IBM unit acquired PureEdge, an electronic forms partner based in Vancouver, British Columbia.

Mike Rhodin, general manager of IBM’s Workplace, Portal and Collaboration business, said the combination of Bowstreet and IBM's Rational toolset and WebSphere Portal offer a compelling solution for building and running composite applications.

The acquisition news raises questions about the long-term viability of smaller ISV partners in an era of accelerating consolidation. Along with IBM, software makers such as Adobe Systems, Oracle and Microsoft have been buying ISV partners over the past few years.

"Bowstreet has been very tight with IBM for years, so this is not a surprise. And you have to give Bowstreet credit for hanging in there so long through a brutal start-up period given the occurrences in the larger IT market since the late 1990s. I hope the Bowstreet investors got a meaningful return," said Dana Gardner, principal analyst at Interarbor Solutions, Gilford, N.H. "If there are any larger trends to point to from these acquisitions, it's that best-of-breed middleware needs to find a home. Enterprises want an integrated procurement experience, not necessarily a unified and overly complex stack technically."

Acquisitions tend to be a "common exit strategy" for small ISVs, Rhodin told CRN on Monday. But waves of consolidation are typically followed by waves of innovation and startups, he said.

This story was updated Monday morning with analyst comment.

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