Unica expects the merger of its Affinium Plan with MarketingCentral will contribute to the growth of its on-demand MRM solutions; meanwhile, the vendor lowers revenue projections, to Wall Street's dismay.
Posted Jul 10, 2007
Enterprise marketing management (EMM) vendor Unica Corp. announced Monday that it is in the process of acquiring MarketingCentral LLC for $12.5 million in cash, plus transactional costs. MarketingCentral is a provider of on-demand marketing resource management (MRM), an important subdivision of EMM. In addition to addressing the needs of customers who want to run an MRM solution quickly without extensive resources or support, Unica says the acquisition will enable it to reach out to a new population--small and midsize businesses (SMBs).
The acquisition comes on the heels of a lackluster sales period for Unica. The company reported sales and revenue figures after the stock market closed Monday that were significantly lower than expectations, and in Tuesday trading the Waltham, Mass.-based company lost more than a quarter of its market capitalization.
In a Monday morning conference call discussing the MarketingCentral acquisition, Yuchun Lee, Unica's chief executive officer, expressed confidence that the merger would open up new and profitable opportunities. "We see a need for such a capability when an enterprise needs to tactically find an easy way of on-boarding their MRM solutions starting at the departmental level," Lee said. "We also see MarketingCentral as suitable and compelling to SMBs." He added that the acquisition will "expand Unica's MRM offering by strengthening our ability to address the SMB market."
While the prospect of attracting SMBs was highly enticing, Lee also described the benefits that he hopes to see emerge for enterprise and large marketing agencies. Unica plans to integrate MarketingCentral with its current MRM solution, the Affinium Plan module. This will give larger corporations the comfort of "an enterprise-class MRM solution in Affinium Plan that is protected behind a firewall," Lee said, adding that the merged product will be "connected to a secure on-demand collaboration space in MarketCentral for working with dispersed project teams, marketing agencies, marketing service providers and outside marketing vendors." In addition, MarketingCentral currently has 250 customers representing more than a thousand users. Of these, more than a hundred customers are associated with larger organizations that Lee believes will create "good potential for cross-selling in a combined customer base."
Despite Unica's claim that the hybrid model of integration will combine the "best of both worlds"--keeping part of the solution on premises while the other part of the solution would be on-demand--Kimberly Collins, research vice president at Gartner, suggests that integration is also one of the biggest challenges the company will face. Although both segments of the hybrid solution are based on the programming language known as Java Platform, Enterprise Edition (Java EE), Collins says, the integration has to bring about a "seamless" transition between on-demand and on-ramp service. Particularly for larger enterprises that might have an on-ramp solution, or for corporations that choose to adopt one later on, there needs to be a common code base. As an example, Collins suggests that companies may want financial information kept on-premise, while on-demand could be used to "open up a network of agencies." Whether Unica will be able to deliver remains unclear, Collins notes. "How [Unica] chooses to integrate will be the key for the success of the hybrid model," she says.
Nevertheless, Collins believes that this acquisition can bring about innovation and a great deal of potential for the overall market. "MarketingCentral probably has more experience in the creative side of marketing, so it brings experience in new areas of marketing to Unica," she says. MRM companies are quite small, usually totaling no more than $10 million in revenue per year. Therefore, Collins anticipates that being snapped up by a larger, more recognized corporation like Unica will bring "greater viability to a product in [the MRM] space, which should give it greater growth opportunities."
The acquisition is subject to customary closing conditions and is expected to close in late July.
Also on Monday, but after the markets closed, Unica released preliminary financial results for its third fiscal quarter, which ended June 30.
Despite what the company called "strong cash flow" in the quarter, and a slight year-over-year increase in third-quarter revenue (approximately $23.0 million compared to $21.7 million), Unica predicted license revenue for the quarter would be approximately $7.0 million, far below analysts' expectations.
"We are disappointed with the financial results we expect to deliver for the third quarter," Lee said in a statement released Monday evening. "A number of license transactions in our original forecast did not close in the quarter primarily due to sales execution issues, though we currently expect that a majority of these transactions will close in future quarters." He added, "We are optimistic that the sales execution issues we are facing are within our control."
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