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Big Bird Dines Again

Written By: D. Geller
Published On: May 1 2000

Big Bird Dines Again
D. Geller - May 1st, 2000

Event Summary

Peregrine Systems Inc. (NASDAQ: PRGN) will buy Harbinger Corp (NASDAQ: HRBC) in a stock transaction valued at $2.1 billion. The deal is expected to close, after approval by the stockholders of both companies, in July.

Harbinger was an early leader in e-commerce, with a specialization in EDI (electronic data interchange), a protocol used extensively in a number of industries, including banking and manufacturing. The company has been going through restructuring upheavals in the past few years as it attempted, largely through acquisitions, to retarget itself away from EDI to the Internet. It is particularly well known for making it possible, through its EDI network and catalog software, for small and mid-sized companies to engage in e-commerce. In its new plumage as an Internet company it has developed harbinger.netsm for hosting ASP software offerings and marketplaces.

Peregrine has been building on its reputation as an infrastructure company, well known for asset management in particular, to create a niche in e-procurement as the unique solution enabling purchasing and life cycle tracking of fixed assets. Peregrine recently announced a partnership with Commerce One, giving Peregrine's e-procurement customers access to the Commerce One MarketSitetm.

Figures 1 and 2 show recent revenues for the two companies. Note in reading Figure 2 that Harbinger's fiscal year ends in December while Peregrine's ends in March. Peregrine last showed a profit in FY 97 while Harbinger had losses in '97 and '98 but returned to profitability in '99.

Specific details of new products and integration schedules have not been announced. However, it seems clear that there will be a large emphasis on the creation and management of marketplaces as well as providing the tools to let customers build their own.

Market Impact

In the biological world new species are generated as a result of changes to the niches in which they have prospered. Here we have the new species first. Will it find a single comfortable niche? Or will it turn out to be a sport, not well adapted to any habitat it tries?

The answer will lie in how well the new Peregrine brings together its two somewhat disparate customer bases, and how well it succeeds in creating self-sustaining marketplaces. On the latter point, while it is obvious to nearly everyone that a strong marketplace can be a cash cow that generates pails of money in the form of relatively small transaction fees, the companies that the market is betting most heavily on to do exactly that have not yet reported even a trickle. So while there will undoubtedly be successes, it just isn't clear what the economics and mechanics of successful marketplaces will be.

As for bringing value across the customer bases, we can only speculate at present. Beyond the convenience of dealing with fewer vendors, the combination has to bring real value.

Peregrine is still working to integrate its current offerings under a single unified architecture; while even the promise of that unification is helping them make sales, we just don't know whether a single suite will ultimately prove more enticing than a best-of-breed approach.

With open interfaces being the song that fills the air this spring, how hard will it really be for a company to match someone else's purchasing application with Peregrine's Asset management solution? Even less obvious is the advantage of using Peregrine's marketplaces to companies that have Peregrine's e-procurement software. Which is not to suggest that the new company will fail to prosper or to achieve some level of synergy. It's simply not clear if its new model will be so compelling as to attract a flock of competitors.

One thing that seems certain is that Peregrine is already flexing its talon for the next acquisition. A likely candidate will be one that offers various kinds of auction capabilities.

User Recommendations

We think that some users will care about this announcement someday - within three months for announcements and maybe a year or so for actual implementations. Right now we can't say that the announcement should upset any pending acquisition decisions, although it would be logical to give Peregrine some extra marks in the "vision" category.

 
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