NEON Systems Inc is turning to acquisitions, following its recent Shadow zSeries product launch, to help establish the company’s presence as a solid number two mainframe integration supplier behind heavyweight IBM Corp.
Chief executive Mark Cresswell told ComputerWire that NEON planned to become more aggressive, with acquisitions that add features to existing products or add customers to the company’s footprint, helping grow the company’s overall market share.
NEON’s recent acquisition in July of InnerAccess Technologies saw that company’s zOS web services interface integrated with NEON’s Shadow while 80 InnerAccess customers were added to NEON’s client roll-call.
Cresswell called the current version of Shadow zSeries the ‘final piece’ of the mainframe integration puzzle, meaning customers do not need to approach different vendors or buy different software products to enable mainframe integration.
There’s a great number of small companies snapping away [at IBM]. If we can make some well timed and considered acquisitions in this space we will emerge as a much stronger company and offer a viable number two to IBM, Cresswell said.
There are some peripheral areas beyond the core – web services management could be one area into which we move. Our best chance of success is by becoming the dominant company in mainframe integration.
Number two in Cresswell’s book means second in terms of mindshare, customers and influence. Where we want to be is when someone wants to hook up applications to the mainframe, they will talk to IBM and NEON, Cresswell said. IBM is not just a competitor to NEON, though, it is also a partner – as IBM resells the Shadow product under its WebSphere business integration brand.
Plans for acquisition come as NEON believes it can deliver between $17.5 million and $18 million in revenue during the company’s fiscal year for 2005. During NEON’s most recent fiscal quarter, revenue fell 14% for the three months to June 30 to $3.6 million while losses from continued operations have risen to $967,000 up from $109,000.
NEON believes its best growth opportunity lies in the range of mainframe devices of 500 MIPs and above, which account for 98% of revenue. Web services, NEON says, have delivered a simple, easy-to-use architecture for integrating mainframes that outdates connectors used by companies like IBM and BEA Systems Inc.