Analysts don't understand the synergies of this merger.
From the analyst quotes I've read concerning the merger, it is clear to me that they don't understand the business they are covering. Here are some real gems:
"We're looking at a lot of questions about why the hell Rational would do this when they appeared to be winning the war with Pure Atria anyway," said Kris Tuttle, analyst at Soundview Financial Group.
Huh? The flagship products of these companies (i.e., Rose, Purify, and ClearCase) don't directly compete against one another. In fact, there is little overlap between their product lines. Both have load testing tools; but they represent a small percentage of revenue for both companies. Both also have Configuration Management tools. But Rational's CM tools have very small market share and very little mind share. The only reason that I know about Rational's CM tools is because I found them on the Rational Web site. I don't know of any organizations using these tools, and they have never appeared in a discussion on the configuration management newsgroup. On the other hand, PureAtria's ClearCase is a market leader. My development group uses products from both companies and we have never considered the companies to be competitors. So, what war is this analyst talking about?
"But Rational is placing its bets on rigid, industrial-strength development tools at an awkward time. Rational and other development tool vendors face a fundamental threat from Java, a programming language that is all the rage among Internet and computer networking software developers, who do not need such rigid tools."
History repeats itself. Once again, a new language has emerged that will cure classic software development problems. Don't believe it. Java is just another computer language. Java still requires object-oriented analysis and design. Java still requires configuration management. Java still requires debugging and profiling. Java still requires load testing. The only problem Java poses to development tools vendors is updating their tools to support it. Its similarity to C++ makes this an easy task for some tools. Its implementation as a virtual machine makes it difficult for others. Also, the statement ignores the fact Java is not appropriate for many software development tasks. Like many computer languages, Java was originally designed to make development easier for a particular class of software: portable, secure, web-based transactions. But politics have already taken over, and many companies are attempting to add capabilities to Java that make it a more general purpose computing language. If they succeed, Java programming will be just as difficult as programming in Visual Basic, Pascal, or C++.
If the merger is confusing to analysts, how do you think the average investor feels? Only fools invest in what they don't understand just because it "looks like a good deal". This is basically what I've been trying to say all along. There are many possible reasons why the discount was created in the first place. Only lack of interest and confusion has sustained it until yesterday. Yesterday's narrowing of the discount showed that investors will act when they have real news, not when they are laden with confusion and doubt. |
