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Mercator Continues to Suffer Turmoil - Can They Stay on the Map?

Written By: M. Reed
Published On: January 9 2001

Mercator Continues to Suffer Turmoil - Can They Stay on the Map?
M. Reed - January 9, 2001

Event Summary

In August 2000, TEC examined the fate of Mercator Software (NASDAQ: MCTR). See EAI Vendor Mercator Drops to a Lower Place on the Map for complete details). The vendor missed their second quarter earnings estimate by 4 cents a share (predictions were 8 cents a share), and dropped 54 percent in value. Estimates showed the stock at $24.75. The company reported higher than forecasted marketing expenses for Q2, and the fact that Ira Gerard, the CFO, was stepping down due to health reasons.

Since that time, Mercator stock has nose-dived to $4.31 (as of December 18, a 92% drop in the last 12 months), founding CEO and President Connie Galley has resigned, Richard Applegate has been named permanent CFO (serving in an interim role since September), and there will be individual Presidents for each of the regions, which are North America, EMEA (Europe, Middle East, and Africa), and Asia/Pacific. James P. Schadt, the company's chairman, has been named as interim CEO until a successor to Galley can be found.

On a more positive note, the vendor has announced that for the quarter to date through November, the company has booked over $18 million in revenue. This is approximately a 50% increase over the same two-month period in 1999. In addition, Mercator announced that Amazon.com has selected them as a "key technology" for Supply Chain Integration, specifically in the area of managing event-driven transaction flows.

Market Impact

It is likely that other EAI and B2B vendors are looking closely at Mercator. Mercator's Integration Broker technology is solid, they have over 5000 customers and 100 partners, and can be had for a bargain basement price. It is possible (30% probability) that Mercator will merge or partner with another vendor, hoping to provide an end-to-end EAI/B2B solution. This is the same approach that was taken by webMethods and Active Software in their recent merger (see webMethods gets Active (Software That Is)).

User Recommendations

Companies looking at Enterprise Application Integration products should still include Mercator on a long list of vendors to be considered. However, it would be wise to keep an eye on where their stock evaluation goes in the near to mid-term, since their capitalization will effect how they can fund research and development efforts going forward. Also, as mentioned above, their currently insufficient market capitalization can make Mercator subject to a buy-out by another software firm (which Mercator vows to resist), which could put their product development plans in turmoil.

Editor's Note:
This article has been modified from its original form since the original publication date.

 
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