jbminn

3 minute read

Today Collabnet announced an agreement to purchase SourceForge Enterprise Edition:

http://biz.yahoo.com/e/070425/lnux8-k.html


Let the consolidation war begin.

This pretty clearly indicates the difficulty that both have had in growing their enterprise customer base. And since the deal was equity only (plus a small advertising dollars commitment over 30 months), this places enormous pressure on Collabnet for a strong exit. IBM already made a purchase in this space (Rational, whose own foray into the on-demand space years ago, Catapulse, was a spectacular flameout), and is unlikely to go too far away from the foundation of that license-fees cash cow.

CA has thus far shown no interest in on-demand solutions, so they are unlikely to step in as a white knight anytime soon. In fact, just three days ago at CA World, John Swainson made mention of “Software as a Service” in the same context as “Web 2.0”, suggesting either a serious misunderstanding of SaaS, or more likely CA’s position that while interesting, SaaS (on-demand) is not in CA’s immediate game plan.

BMC might try to make a play here – and who knows, maybe even Borland. Google would have been a likely candidate, but I speculate they did consider both Collabnet & SourceForge a couple years back, but due diligence indicated they could build a better solution (the result being Google Code). Oh, and just for completeness: Microsoft? Not a chance, so long as Collabnet is involved in SVN and its relationship with the Apache Foundation remains too cozy for comfort.

I had an email exchange with a colleague who is almost as familiar with this space as me. He seemed to think that Collabnet was preparing to announce something else, perhaps another round of financing. I disagreed.

The math on the VA revenue (16K per week for 30 months) indicates this may have been an afterthought, or perhaps someone was looking for cash to cover expenses on some other initiative inside VA. It is almost immaterial with respect to the transaction, so I’m curious why it was attached to this deal.

I would be very surprised to see Collabnet raise more money. Somebody was diluted by those 11MM shares going to VA. If I am an investor, I’m asking these questions:

What on earth did Collabnet really buy? The brand? The technology? Customers?

Is the Collabnet brand viewed so weakly in the marketplace that they had to purchase a competing brand? Or is it an open acknowledgment that Collabnet’s technology doesn’t scale well (I’m told that almost everything ends up being a custom one-off), and that they are planning to adopt SFEE technology to replace Collabnet’s stuff?

How this is good for Collabnet is hard for me to see. But what do I know.