Update: IBM to buy Informix database business

Informix has inked a deal with IBM to sell its database business to IBM for $1 billion dollars in cash.

Informix has been struggling for several years in the database market, which is dominated by Oracle and where IBM remains a strong contender with its line of DB2 products for mainframe, Unix and Windows NT servers.

For IBM, the move will eliminate a rival in the market for Unix and Windows NT/2000 databases. IBM officials Tuesday said that the acquisition will double the size of IBM's database business. IBM may also be able to use some of the well-regarded Informix database technology for managing nonrelational data, although DB2 has had somewhat similar capabilities for several years.

During a teleconference Tuesday, IBM officials described the competition with Oracle as a "war."

"We've had 14 consecutive quarters of [database revenue] growth," said Janet Perna, general manager of IBM's data management solutions division. She said the DB2 growth rate in the Unix and NT market for the most recent quarter is over 30%, which is "several times more than the industry and several times more than Oracle."

"We're dead serious about this [market]," she said. "We're playing for first place."

Informix, which recently relocated its headquarters from California to Westboro, Mass., made the announcement this morning, along with its first quarter's earnings. For the period ending March 31, revenue dropped to $217.1 million from $226.8 for the fourth quarter. A year ago, the quarterly revenue was $250.9 million.

Net profit also dropped quarter to quarter, to $18.3 million, but that was before $4.2 million in charges to pay for splitting Informix's business into two subsidiary companies. One, Informix Software, focused on database products, the other, Ascential Software, focused on data integration, data warehouse software, and content management.

Net profit before charges for the fourth quarter was $27.1 million. For the first quarter a year ago, net profit was $14 million.

IBM is buying only the database company, Informix Software, which currently accounts for about 80% of the parent company Informix's revenue. Proceeds from the sale will be about $800 million after taxes, according to Informix. The transaction is expected to be finalized by September. When the transaction is done, Informix will adopt the Ascential name.

Perna said IBM will evaluate the Informix database technology, including its object-relational software that lets it manage non-relational data, and the data analysis software from Informix's much earlier acquisition of Red Brick. Another product being evaluated is still another Informix purchase, Cloudscape, which is a small, Java relational database designed for handheld and embedded applications. IBM has already developed corresponding technologies that are already part of its DB2 Universal Database product.

Some of Informix's work supporting spatial and time series data are likely to be incorporated into future versions of DB2 UD, Perna said.

In a statement, Informix Chairman and CEO Peter Gyenes said the deal will give debt-free Ascential plenty of cash and a yearly revenue stream currently of over $130 million. Despite the economic slowdown, Gyenes is still predicting Ascential will grow 35% to 40% this year, and 40% to 50% in 2002.