3rd June 2005 The rash of consolidation sweeping through the applications software sector has taken on a transatlantic flavour with US-based Lawson Software’s announcement that it is to buy Intentia, the business applications vendor headquartered in Sweden.
As a result of the $480 million deal, the CEO of Lawson, Jay Coughlan, will leave, with an outsider – Harry Debes, veteran of the applications business who has held senior positions at JD Edwards and Geac – drafted in to run the expanded Lawson.
The transaction confirms that neither company feels it has adequate momentum globally to survive in the mid-market applications segment that they target. Aside from battling traditional competitors such as SSA, Unit 4 Agresso, Geac, Exact, Systems Union and IFS, the merging companies are being challenged by a downward push from the large ERP vendors, principally Oracle and SAP, and a move upmarket by Sage and Microsoft.
Post-acquisition, Lawson will have around 3,500 employees and 4,000 customers. But neither company has detailed which of their products are expected to survive the merger.
Lawson is highly unusual in the applications market in that it has never prioritised international expansion. For the company’s fiscal 2004, only 6% of total revenues came from outside the US.
As a direct mirror of that, over 80% of Intentia’s business comes from Europe, with around 4% of revenues sourced from the US. Despite its Swedish origins, for the past 18 months, Intentia has been under the controlled of US investors, principally the Silicon Valley software holding company, Symphony Technology, which became Intentia’s largest shareholder in late 2003. Its CEO Romesh Wadhwani chairs the Intentia board. Wadhwani and Richard Lawson, one of the company’s co-founders and Lawson’s largest shareholder with 15% of its stock, will co-chair the new company.
Notwithstanding their contrasting international profiles, the two companies are of comparable sizes. Intentia’s revenues for the year to 31 December were down 4% to SEK 2,982.9 million ($414.6m); Lawson’s revenues for the 12 months to 31 May are expected to show a decline of around 5% to $353 million.
But, the two are at key stages in their product cycles. In May, Lawson announced the fruits of a three year development project to rewrite the company’s product line around a service oriented architecture. ‘Project Landmark’, which was led by Richard Lawson, promises “a new standards-based business applications platform designed to leapfrog the software industry by dramatically increasing overall application quality and improving the product lifecycle experience.”
In the meantime, though, sales of existing products are crashing. In the quarter to 28 February, the company only sold $13.9 million worth of new licences, down from $25.2 million in the year-earlier period and accounting for just 17% of total revenues.
In contrast, the latest release of Intentia’s Movex product is selling well. Its first quarter results show licence sales up 22%, although it too is struggling to win over new customers – new licence software sales only account for 10% of its revenues.