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.