PeopleSoft Grabs Cohera in Content Bid

In its second acquisition of a small, private software company in as many months, enterprise software behemoth PeopleSoft(PSFT) has bartered a deal to buy content-management firm Cohera, industry sources said.

The deal will allow PeopleSoft to offer its customers the ability to manage data and information inside the business software it sells, an ability many software firms are currently jockeying for. Neither company would comment, but others close to the deal say it is all but consummated.

"Content is really big right now," says Mark Klopp, managing director of the venture arm of Eastman Chemical(EMN), which has aggressively invested in e-business companies in Silicon Valley, including content-management firm Saqqara Systems in May. "The ERP (enterprise resource planning, or business software) players are looking to add content right now, and there's a lot of people in the space, so consolidation is happening. The pricing, especially in the private sector, is very attractive for acquisitions right now."

A PeopleSoft spokesman, citing the company's self-imposed quiet period prior to its scheduled earnings report later this month, had no comment on the deal. Cohera executives did not return phone calls.

But PeopleSoft has made no bones lately about its openness to acquiring other companies, especially at a time when private software firms are being pressed by the economic slowdown. In May, PeopleSoft announced a $33 million acquisition of SkillsVillage, which makes software to automate the hiring of contract employees. At the time, PeopleSoft CEO Craig Conway said the privately held firm was "cash strapped," and boasted of the relatively low price he paid for the company, which had $10 million in sales last year.

A source familiar with the Cohera deal said the company had "hit a wall in a big way" financially, and characterized the transaction as a "fire sale." The source, however, did not know the exact terms of the deal. According to information on Cohera's Web site, the company had secured $18 million in funding through the second quarter of 2000.

A second source familiar with the transaction said PeopleSoft was poised to announce the deal soon. Both sources asked to remain anonymous.

While many smaller software firms currently are cash poor, PeopleSoft has a $1.1 billion bank account, and has pledged to use that money to buy other firms when it makes sense to do so. Last October, the firm promoted then-CFO Steve Hill to senior vice president of business development, assigning him the task of "pursuing mergers and acquisitions," according to a company press release.

"They've certainly announced their intentions to pursue [an acquisitions strategy]," says JPMorgan H&Q analyst James Pickrel, who rates PeopleSoft buy. "They haven't done a lot so far, but they've clearly been on the lookout." (His firm hasn't done recent underwriting for the company.)

Hayward, Calif.-based Cohera was founded in 1997 by Massachusetts Institute of Technology Professor and former Informix Chief Technology Officer Michael Stonebraker to mine opportunities in an area known as "distributed data integration." That process allows companies to access information they need but don't necessarily control. The company developed and started selling in January 2000 its E-Catalog System, which helped B2B exchanges catalogue their suppliers' products.

"Basically you're looking at the marketplaces and systems that need to have the product information loaded and electronically available, and traditionally, that stuff's been offline and in spread sheets," says Eastman's Klopp. "To make that stuff Web-enabled and send it out to multiple sites, that's a pretty tough process, no matter how you cut it."

JPMorgan H&Q's Pickrel said adding that kind of capability to PeopleSoft's products could help the firm sell more software.

"In my mind, it would be a smart acquisition," Pickrel said. "The basic premise of document-centric information integration is key. To the extent that a vendor of key applications can help with that effort, that makes the buying proposition that much more attractive."

Other analysts contacted for this story, however, wondered if the move signals a deeper interest on PeopleSoft's part in selling procurement software, the core domain of companies such as Ariba(ARBA) and Commerce One(CMRC). PeopleSoft executives did not respond to messages to comment on that aspect of the deal.

>To order reprints of this article, click here: Reprints