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Retail Technology, Retail technology News

Analysts say ATG complements Oracle

Tuesday November 9 2010

Acquisition news broadly welcomed, as e-commerce firm posts positive third-quarter results

Acquisition news broadly welcomed, as e-commerce firm posts positive third-quarter results


Analysts have broadly welcomed last week’s move by Oracle to acquire leading e-commerce provider Art Technology Group (ATG) last week.


ATG announced last Monday that it is being acquired by Oracle $6 (£3.71) per share in cash, or approximately $1 billion (£619 million).


The companies said the transaction would be subject to stockholder and regulatory approval and other customary closing conditions and was expected to close by early 2011.


At the time, ATG also reported that its e-commerce software was “highly complementary” to Oracle's portfolio of customer relationship management (CRM), enterprise resource planning (ERP), retail, and supply chain applications, as well as its portfolio of middleware and business intelligence technologies.


Together the companies added that they expect to help businesses grow revenue, strengthen customer loyalty, improve brand value, achieve better operating results, and increase business agility across online and traditional commerce environments.


"Driven by the convergence of online and traditional commerce and the need to increase revenue and improve customer loyalty, organisations across many industries are looking for a unified commerce and CRM platform to provide a seamless experience across all commerce channels," stated Thomas Kurian, Oracle executive vice president of development. "Bringing together the complementary technologies and products from Oracle and ATG will enable the delivery of next-generation, unified cross-channel commerce and CRM."


Consolidation greeted positively


This view was broadly supported by industry analysts, who pointed out that the deal confirmed rumours that had swirled around Oracle as a potential buyer of ATG for some months.


Brian Walker, principal analyst at Forrester Research, agreed that not only are the two companies’ solution sets complementary, but the deal also allows each to address gaps in their solution portfolios.


“Oracle has had a significant hole in terms of e-commerce capability needed by its ERP, CRM, and supply chain clients,” wrote Walker in a blog posting. “ATG has lacked enterprise order management and CRM capabilities required by its more sophisticated clients. Together these offerings will make a compelling pairing.”


Though he warned that: “Productisation and packaging of the offering may remain a challenge for the near future.”


Product alignment touted


"More than 1,000 global enterprises rely on ATG's solutions to help increase the value of their online customer interactions," said Bob Burke, ATG president and chief executive. "This combination will enhance the ability to bring all their commerce activities together – creating a more consistent and relevant experience for their customers across all interaction channels, including online, in stores, via mobile devices and with call centres."


But Walker: “There is a significant overlap in customers, but integration of the product will remain tricky and possibly slow. Merging the products, salesforces, and roadmaps of large organisations is difficult. Many, many books have been written trying to help people get this right.


“For Oracle, there are existing commerce solutions in iStore and Siebel, which need to be rationalised with ATG’s products. Oracle has had an IT orientation, selling into the technology teams and seeking to drive value to the CIO [chief information officer].


“ATG has had a largely business orientation seeking to drive the goals and objectives of the channel leaders and CMO [chief marketing officer], which has also led it to introduce on-demand hosted offerings. Determining how to combine and sell these products and normalise the cultural approaches may be very challenging.”


Integration challenges remain


Gartner CRM research vice president, Gene Alvarez also pointed to the functional overlaps between the companies’ products. “The companies must reconcile product offerings before customers can fully benefit from the planned alignment,” he wrote in a news analysis.


“Oracle iStore has a large installed base in business-to-business (B2B) e-commerce organisations, while ATG’s installed base is largely business-to-consumer (B2C). In addition, Oracle Siebel e-commerce has a small installed base in telecommunications. Currently, there is very little conflict among these solutions. Until a new road map is released, we believe that these e-commerce products will remain separate and will separately address B2B and B2C e-commerce markets,’ Alvarez continued.


He added: “However, B2C organisations will gain from a shift to ATG due to its strengths in B2C online sales and merchandising. Consider this shift once a new road map for the ATG and Oracle offerings has been released.”


Positive third quarter results


On 2 November, ATG also reported that its revenue for the third quarter of 2010 grew to $50.3m (£31.2m), a 16% increase over third quarter (Q3) 2009 revenue of $43.4m.


Product licence bookings, a non-GAAP measure, which the company defines as the sale of perpetual licenses, grew 37% to $14.2m for Q3 from $10.4m year-on-year.


Q3 net income in accordance with GAAP was $4.2m (£2.6m), or $0.03 per diluted share, compared with net income of $4m (£2.5m), or $0.03 per diluted share, in Q3 2009.


Non-GAAP net income was $8m (£5m) in Q3 2010, or $0.05 per diluted share, compared with non-GAAP net income of $5.5m (£3.4m), or $0.04 per diluted share, in Q3 2009.