Softbank and Computer Associates publish the bans
The announcement of a prenuptial agreement between Poland's largest computer software manufacturer and systems integrator and a U.S. business software producer took the IT market by surprise last Tuesday, but analysts nonetheless gave their blessing to the union.
Softbank and New York-based Computer Associates (CA) said they signed a letter of intent to create an application service-provider joint venture to offer electronic business services, including internet access and software sales over the internet. Computer Associates will own 51% of shares in the yet-to-be named enterprise, while Softbank will control 49%. The two companies said the joint venture will deliver software applications and services to businesses in Poland and the rest of Central and Eastern Europe.
"There is no single IT company in the region that would dominate (it) as such," said Tomasz Berent, an IT analyst at Paribas in London. "This (joint venture) could evolve to the state where the two companies could bid for deals across the region."
Analysts said they had expected Softbank to announce that it had landed a strategic investor rather than a joint partner based on the company's previous statements during the past few months. Softbank's one-time strategic partner ICL, a U.K.-based information technology firm, pulled out of the company last year to resolve its own financial problems, analysts said. After ICL left the Polish company, Softbank's president, Aleksander Lesz, planned to sell a portion of his 45% stake to a strategic investor. The new joint venture with CA ended Softbank's search for an investor, analysts said.
Both companies want to become regional players in Central and Eastern Europe in anticipation of the demand for the electronic business software services they will offer, analysts said.
"They will try to create tailor made add-ons to existing systems and create unique products for banks and telecom companies," said Tom Chadwick, an IT analyst at Merrill Lynch in London.
And despite the region's current lack of demand for e-business services, the new partnership will create a demand, they said.
"It's all about positioning themselves for the future," Berent said.
Although the companies did not disclose the financial terms of the deal, Softbank will bring to the table its collection of smaller Polish internet service providers worth a total of about $5 million, Chadwick said.
Analysts said that it would take six months to a year before any services were launched. The partners will have to conclude their ongoing negotiations as well as work out the marketing and promotion of their services, said Maria Skowron-Szafranska, an IT analyst at CDM Pekao Securities.
The partnership will benefit Softbank in particular, analysts said, by allowing the firm to diversify its software application offerings and to possibly enter the rest of the Central and Eastern European market.
"In the long term, Softbank needs new products, new markets, a new client base and a new geographical expansion," Berent said. "The primary aim for Softbank was to team up with a known brand ... and to diversify its revenue stream, which is dominated by banking software."
Softbank started operating in Poland in 1989 and currently has more than 700 employees. By the end of 1999, the company's sales totaled zl. 320.6 million ($82.2 million). CA has 20,000 employees worldwide and had more than $6 billion in revenue for the fiscal year ending March 2000.
