Bravo and Verticalnet – what the markets think

BravoSolution announced last week that it is buying Verticalnet. Or, as the relevant headline on finance.yahoo.com puts it: Italcementi unit agrees to acquire Verticalnet in deal worth 15.2 mln usd.

Quite big news in the eSourcing technology space. Bravo is a credible player particularly in mainland Europe, backed by €2.8bn Italcementi, but has no US presence. Verticalnet apparently has some good software and has some US customers but has no real idea of how to sell its software. So on one level the tie-up kind of makes sense. I admit it I was of this opinion when I first read the news.

But look at the stock prices of the two companies:

Bravo (Italcementi)
Italcementi.png

Verticalnet
Verticalnet.png

Irrespective of what pundits and marketers might think, the markets are not amused.

The announcement was made public around the 26th October. Just around the time that Verticalnet’s stock tanked. And it certainly didn’t make a positive impact on Italcementi’s share price.

Assuming people were buying Verticalnet stock on the strength of rumours of the company selling out – these people were mightily disappointed when they learned it was Bravo who was doing the buying. And they stampeded.

Meanwhile in Milan no-one even noticed.

Are the markets trying to tell us something? Like:  Software wants to be free. So why should an organisation get involved in costly, complex (and ultimately disappointing) deployments? Especially if they are only going to use a tiny fraction of the system they bought? This e-sourcing software space is so over.

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5 thoughts on “Bravo and Verticalnet – what the markets think

  1. No. It’s just beginning. We’re in the transition period between “great new technologies are developed” and “great, usable, valuable, business solutions are delivered”.

    The real e-Sourcing boom has not yet begun, but the vendors leading the way will not be the vendors of yesterday, or even most of the vendors of today, but the vendors of tomorrow that get not what it is, but what it needs to be.

    The future is coming … even though it’s not here yet.

    We just need a few of the former innovators, now laggards, to get out of the way.

  2. Pingback: How software implementations fail « Where Next

  3. CPO

    Mmmnn interesting theory Alan, as much as I hate to say it eSourcing does not have that big an impact, I think it is pretty unlikely that an organisation with a c6 billion Euro turnover (& a history of successful acquisitions) will be dented by a 15 million Euro investment? …I suspect macroeconomic factors such as the rising oil price impacting the sector profitability is more realistic.

    It’s also more likely that the VerticalNet investors became aware of the seriousness of thier financial situation and chose to contine holding shares in a company of such risk, regardless of how great the product is.

    See this for another view on the subject: http://www.spendmatters.com/index.cfm

    As TradingPartners are a competitor of Bravo & VerticalNet, what do you think will be the impact on the market?

  4. Hi. Thanks for taking the time to comment on the post, and for asking the key question.

    My immediate reaction to the news was similar to the ones you have highlighted above (in fact I first saw the story on Spend Matters who gave some useful insight into Verticalnet’s situation). I felt, like many others, that it was a very smart stroke. Company with plenty of financial muscle (Bravo) acquires company with apparently good products but unable to make a profit out of them (Verticalnet) giving Bravo a credible presence in USA at the same time. And Bravo gets all this for relative peanuts. Potential customers who like Verticalnet’s software can be reassured of Italcementi’s financial backing.

    But if I step back and look at the whole e-sourcing software space this aquisition looks like one more slow step in the gradual decline of the e-sourcing software industry. Of course this is my personal view, bla, etc.

    Here’s why:

    Obviously a $15 million transaction is not going to register highly to a multi-billion € business. And it is because of precisely this reason that I chose the “Italcementi unit …” quote rather than one of the more excitable ones – because from a big picture perspective this is small news.

    But rewind a few years. There was a time, according to Red Herring at least, when Verticalnet was worth $12 BILLION. Imagine Italcementi buying into that. That would have been major news, but that was back in the days when e-sourcing was sexy.

    In 2007 the interesting valuations are with Alibaba and Baidu. Perhaps bubbly but I would expect that having a “China Strategy” is higher up the list of most practitioners than debating which brand of e-sourcing software to use. Similarly, as you indicate, a weak dollar and high oil prices are more interesting than e-sourcing software.

    The Doctor put it best in the first comment on this post. Traditional software vendors have a limited shelf-life left. People are now experimenting with new ideas of where to take the sourcing space next … is it going to be Coupa’s open source stripped-down software? Vinimaya’s artificially intelligent agents? The facebook-style supplier network that Spend Matters has been mentioning recently? Iasta’s blog/wiki community? MFG.com’s attempts to predict parts pricing? Or even TradingPartners’ single-minded focus on auctions? Who knows, but in my view a breakthrough in one of these areas is going to create far more long-term value than the software consolidation we are seeing going on at the moment.

    So what do you think? How do Ariba/Freemarkets, Ariba/Procuri and Bravo/Verticalnet stack up? What do they all mean? Which one is the most significant? Which one is going to breathe new life into the way practitioners do strategic sourcing?

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