Ecometry founders to sell to Syngistix

Smith, Gardner’s offer to take company private gets topped by $2.4 million

Pledging their 35-percent stake in the company, Ecometry founders Wilburn Smith and Allan Gardner are backing the $36 million sale of their publicly traded company to Syngistix. Company officials now expect the deal will execute in the April or May time frame, a sale that will bring $2.4 million more in cash than a prior offer by the founders to take their company private.

The offer from Denver-based Syngistix tops a deal that was on the table from the SG Merger Corp., formed by Ecometry’s founders, to pay $2.70 a share for the outstanding shares. Syngistix is offering $2.90 per share.

The acquisition of the leading source of new HP 3000 sales during the past three years is not wrapped around that platform’s sales potential, however. Ecometry’s CEO cited the prospect of gaining its suitor’s alternative platform experience as one of the chief motivations in the deal.

“Syngistix, like Ecometry, originally offered their software solutions on the HP 3000 platform,” said John Marrah in a letter to customers when the deal was announced in late January. “Like Ecometry, their products now feature flexible, open, n-tier architecture and run in the Windows 2000 environment, while Ecometry runs in the Windows 2000 and Unix environments.”

But there are reports from the field that Ecometry’s non-3000 implementations can use the help Syngistix will provide. While about 25 companies have deployed the catalog and e-commerce software on platforms other than the 3000, sources in the community say performance has been an issue still to be solved. One consultant said as recently as December the company was advising prospects who wanted a Unix implementation to take A-Class HP 3000 installations first, and switch their systems to HP-UX later on. HP continues to offer a free switch from MPE/iX to HP-UX systems if customers own an A-Class or N-Class.

Ecometry CEO John Marrah denied the company was advising prospects to install on HP 3000s first. He said that there have been six installations of Ecometry so far this year, and five have been implemented on platforms other than the 3000. Marrah said the company is being sold to get an advantage of two firms working together in similar sectors. Any edge that Syngistix might provide in technology isn’t the only motivation, he added.

“They have some strong expertise in those areas, but frankly we’re way down the pipe there,” Marrah said. “We have a fully functional version of our product set on Unix and NT today. You really have a choice.”

The sale of the company is wrapped around the classic efficiencies which any two merging firms hope to achieve in a merger, he said.

“We’re about the same size companies. Our view and the Syngistix view is that we’re all out there slugging it in the marketplace and spending the same amount of dollars on marketing sales and overhead. By combining, we can provide a much better integrated product and come to market faster. It’s a huge technology boost, but it’s also a great operational boost. The goal is to provide an end-to-end, seamless application, from manufacture all the way to end-line customer.”

Ecometry will be converting few of its existing HP 3000 customers to other platforms until the start of next year, he added, after the customers’ busy holiday seasons. The company is focused on building conversion routines that will give sites a way to convert to another platform online, while production is underway on their existing HP 3000s.

“We have about 20 percent of our customers who would do it this year, if we could provide that functionality,” Marrah said. “But that would be a manual process this year, and we wouldn’t have the resources to put into that. We believe the automated conversion is the right way to go.”

At the same time the company is building conversion routines, Marrah sits on the board of OpenMPE Inc., the organization dedicated to prolonging the lifespan of MPE beyond HP’s end of 2006 departure from the community. Jon Backus, chairman of the board of directors of OpenMPE, said that the Ecometry sale looks like a positive to thing to him.

“Ecometry has been a strong, loyal advocation vendor in the MPE space,” Backus said. “Despite the sale, we look forward to that continuing.”

Despite selling five of its six 2002 implementations on Unix and NT, Marrah said that Ecometry’s performance is about half as fast for a non-3000 Ecometry implementation. “But we have lots of activities underway today [to resolve that],” he said. “In a situation where we have a comparable box, we can process about 50 percent as fast as on an MPE box. We’re making some changes in the database architecture to speed that up.”

Ecometry’s biggest change will be the implementation of an n-tier architecture, which drives the software into a decentralized computing environment. “On MPE we ran the application and the database and the listeners all on one box,” Marrah said. “In the Unix and NT environments we can decentralize those.”

The companies have order processing engines and customer service engines which overlap. But Marrah calls those “pieces of technology we can both share, and we’ll be looking at integrating those over time.” Pushing customers into using one solution or another isn’t part of Ecometry’s plan, he added.

Leaning harder into new technology is not what’s caused the company’s slowdown in sales and red ink over the last two years, Marrah said. Ecometry sold 25 new installations last year, “and we don’t know any of our competitors who sold more than four,” he explained. “Our issue was that the retail channel had a difficult year. Customers already had the systems to allow them to function, so they weren’t upgrading.”

Marrah expects the market to turn this year, “and that will turn us around.” The company is projecting a $2.7 million loss for 2002 before any income tax provisions, according to SEC documents, based on estimated sales of $30.3 million. In the dot-com heyday the company booked $46.5 million in 1999 sales and posted $5.5 million in profits.

“When the economy comes back we will have all of our new technology, and our competitors won’t have the cash we had to invest during these challenging times,” Marrah said.

In the meantime the CEO sits on the board of OpenMPE, an organization dedicated to improving the technology that serves more than 90 percent of its customer base. Marrah said it’s too early to tell what prospects OpenMPE can offer for Ecometry customers. But he added that if he was asked, he’d tell HP to offer an MPE license which would enable a hardware emulator to take off.

“We have a very strong customer base in that platform, and if there is a way to provide a longer life for that platform, it would be positive for our customers,” Marrah said. “We want to make sure we stay very close to what’s happening in that OpenMPE arena.”