Software programming tools vendor Rational Software will acquire its rival Pure Atria but the $850 million merger is threatened by logistical problems and Java.
Rational, which sells tools to software programmers at customers including Andersen Consulting, Barclays Bank, British Telecom, Deutsche Bank, EDS, Microsoft, Oracle and Siemens, announced its plan to take over Pure Atria, the software testing tool specialist, on Monday.
The deal means Rational will represent what was five companies last August, as both partners in the merger have acquired competitors in recent months. That could prove costly; the deal was agreed as a $850 million stock swap but analysts disapproved and both companies? share prices have plummeted, cutting the paper value of the deal in half.
Analysts said developers are not buying tools like Rational?s until they decide whether or not to use Java as an alternative. One also said the logistical problems of acquisition, already faced by both companies, will be multiplied by the deal. Another said the deal was nonsense because Rational was winning its battle with Pure Atria anyway.
Rational acquired SQA in February for $300 million and paid $23 million for Microsoft?s Visual Test software in October 1996. It said Ronald Nordin, product VP at Rational and SQA?s former CEO, resigned as the Pure Atria deal was announced ?to pursue other business interests?. Pure Atria CEO Reed Hastings will join Rational as chief technology officer.
Pure Atria was formed by the August 1996 merger of Atria Software and Pure Software. It then bought Integrity QA Software and analysts said the company has had major problems integrating the sales forces of the three companies. The buys are expected to contribute hefty costs to Rational?s Q2 to September.
Rational has regional sales and support offices in France, Germany, Ireland, Sweden and the UK and is expected to push Pure Atria?s range through its existing sales channels, according to Tim Brennan, VP of finance at Rational. He said the company?s European business is worth around $45 million and will expand after the merger.
?There has been some nervousness about the acquisitions,? he admitted. ?There are tremendous details to work through but we have similar coverage in Europe.?
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