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February 13, 2003 03:18 Boston Software Giant Struggles after Acquisition Jump to first matched term By D.C. Denison, The Boston Globe Feb. 13--Two years ago, Andrew "Flip" Filipowski rode into the Boston high-tech community like a knight in shining armor. Now, considerably tarnished, he`s struggling to stay on his horse. During a 15-month stretch starting in 2001, Filipowski, a Chicago-based software entrepreneur, bought no fewer than five struggling Boston-area technology companies with the intention of creating a software giant, Divine Inc., that would be "a single provider of integrated solutions, combining software, professional services, and managed services." But less than two years after he launched his Massachusetts shopping spree, one of Filipowski`s acquisitions has already backfired spectacularly. And the dramatic slide of Divine`s stock price has clouded the company`s future. The first Boston-area purchase he announced was RoweCom, a Westwood-based provider of journal subscriptions to corporations, research libraries, and universities. During a visit to Boston, in fall 2001, the ponytailed Filipowski glowingly detailed the contribution that RoweCom would make to Divine`s business. "RoweCom has vendor relationships with more than 10,000 customers," he said over breakfast in a Burlington hotel. "Many of them are major corporations. That`s an opening for us to sell them additional software and services." Filipowski`s plans were ambitious, but he had a track record. In the 1990s, he combined more than 70 acquisitions into a software infrastructure company called Platinum Technology International. In 1999, he sold Platinum to Computer Associates for $3.5 billion, a deal that earned Filipowski $290 million. His investment in RoweCom has not fared so well. The company has not only declared bankruptcy, but its collapse has left many of the customers Filipowski so valued feeling angry and ripped off. Some major local research libraries, at Tufts University and Boston University, are now dealing with canceled subscriptions and missing journals. Many publishers are waiting for subscription payments that libraries made to RoweCom last summer. At the end of January, a group of RoweCom creditors filed suit in Boston charging Divine with fraud. The trade publication Library Journal recently labeled the widening mess the "Enron of the library world." Instead of smoothing the way toward more profitable relationships with thousands of potential customers, Divine`s purchase of RoweCom has sullied the company`s brand, and has called into question Filipowski`s vision at a time when Divine, like many software companies, is struggling with a brutal technology downturn, industry analysts said. The RoweCom collapse "doesn`t do anything good for Divine`s image," said David Marshak, senior vice president at the Patricia Seybold Group, a business and technology consulting firm based in Boston. "It will be a public relations challenge for them to regain that goodwill and remind people that RoweCom`s failure does not mean that Divine is also spiraling down as well." A spokeswoman for Divine denied the fraud charges and said the Chicago-based firm would successfully resolve the RoweCom payment and delivery issues. The first hints of trouble at RoweCom surfaced last December when Divine abruptly announced its "intent to divest the content subscription business delivered through its RoweCom Inc. subsidiary." At the time, Divine said that it had signed a letter of intent with EBSCO Industries, a competitor, to acquire the European operations of RoweCom. Divine also claimed to be in active negotiations with Swets Blackwell, another competitor, about a possible purchase of some or all of the RoweCom operations worldwide. But as negotiations dragged on, through December and January, libraries and journal publishers that were RoweCom customers were forced to deal with a morass of canceled subscriptions and lost payments. Late last month, the situation went from bad to worse. Swets Blackwell dropped out of negotiations to purchase any part of RoweCom. A few days later, Divine announced that RoweCom was filing for protection from its creditors under Chapter 11 of the US Bankruptcy Code, in part to facilitate its sale to EBSCO. The next day, a group of RoweCom creditors filed suit against Divine alleging that the company "fraudulently and wrongfully transferred" $73.7 million from RoweCom to the parent company during the 12 months prior to RoweCom`s Chapter 11 filing. The suit charges that RoweCom collected advance subscription payments from customers and diverted these funds to Divine, providing the company with a crucial supply of cash, even though it knew the transfer would cause the bankruptcy of RoweCom. Divine`s actions have also drawn the attention of the New York State attorney general`s office, which filed suit against Divine in January seeking $50 million in damages for breach of contract on behalf of the State University of New York at Buffalo libraries. Divine challenges the validity of the suits. "We believe that the allegations . . . are without merit," said Divine spokeswoman Anne Schmitt. "If we are forced to litigate this matter, we are confident that we would prevail in a court of law. However, we remain hopeful that we will achieve a global solution to this matter that will resolve all of RoweCom`s concerns, including satisfying the delivery requirements to RoweCom`s customers." Yet, even if the pending sale to EBSCO is completed, the confusion and recriminations have called into question the general health of Divine`s business, which depends on the efficient and profitable integration of more than a dozen similar small companies. Divine`s most recent quarterly earnings, released in November, were not encouraging. The company posted a net loss of $37.7 million for the third quarter ending Sept. 30. Divine`s stock price has also been sinking steadily since last spring, when a reverse stock split briefly pumped the price above $18. Yesterday, Divine`s stock closed at 54 cents, a decline of 11 cents. The stock traded as high as $62.50 a share in June 2001. Nevertheless, some analysts are inclined to give Divine and Filipowski the benefit of the doubt. After all, he was able to pull off a much larger feat of software integration in the 1990s. But this is a different software market, in a very different economic climate. "Divine did a pretty good job of picking up some neat pieces of technology," said Rebecca Wettemann, vice president of research at Nucleus Research, a Wellesley firm that focuses on information technology. "But the problems with RoweCom do show that they have some integration issues." ----- To see more of The Boston Globe, or to subscribe to the newspaper, go to http://www.boston.com/globe |
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| aus der Diskussion: | Divine ! Die Aktie der Zukunft. |
| Autor (Datum des Eintrages): | E-L-Schu (17.02.03 16:47:43) |
| Beitrag: | 73 von 74 (ID:8636514) |
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