Etelos Moves Forward With Reverse Merger

Etelos, Inc., a CRM software-as-a-service (SaaS) provider and platform-as-a-service (PaaS) provider, announced a "reverse merger" with Tripath Technology today. Obtaining the defunct and bankrupt company means a new stock symbol and a public status for Etelos -- and the financial stability to build on its new platform.

Reverse mergers are not the most common means for raising revenue, However, Etelos is far from the typical company. The nine-year-old provider, which only began selling SaaS in 2005, is backed by hedge funds rather than venture capital, according to Jeffrey Garon, Etelos' chief executive officer and president. (Garon also once served as chief financial officer for Tripath.) The increased revenue gained from the merger will be used in building what Garon calls the "Etelos ecosystem." The Etelos Marketplace allows for development, distribution, and consumption of Web-based apps such as CRM. On the flip side, Etelos provides its own family of CRM products including Etelos CRM, Etelos CRM for Google Apps, and Etelos CRM for the iPhone.

"This allows us to have the capital to continue to develop the marketplace," Garon says of the merger. "It means that we have the means to ensure the addition to the quality of the apps. It affords us the opportunity to expand the number of partners working with us." The Etelos Marketplace is not targeted to enterprises, such as competitor Salesforce.com or theForce.com, it also differentiates itself by providing back end services, allowing users to use a credit to actually purchase applications on the site.

China Martens, senior software analyst with the 451 Group, says that it looks like Etelos has a fairly well-rounded marketplace, although the financial backing for Etelos raises some questions. "It's intriguing and a bizarre move [the reverse merger], but it rapidly gets them out there," Martens says. "They can choose what they make public about self. It does things on its own terms, but it will make customers more leery about them."

The reverse merger marks Etelos' eighth press announcement this year. Martens remarks that the company has a lot going on, which can be confusing for customers. Etelos released its AOP Beta last week -- "AOP" stands for "Apps On a Plane" -- which allows users to have access and use data both online and offline. Last month, Etelos announced a partnership with BT Global Services "to promote and distribute BT's Web services to give developers the ability to create innovative Voice 2.0 applications."

With the continued devotion to widening its platform horizon, customers may wonder if Etelos is in the CRM business for the long run. Martens says that it's hard to tell and is dependent on whether the application takes off. She says it seems like Etelos wants to use the CRM application to gain attention and serve as an introduction to its marketplace and developing platform. As for the growth of the marketplace, Martens says that Etelos chose to enter at a nice time. However, she says the company seems to have some "teething problems," including a worrying financial situation. She points out that now that Etelos has gone public, perhaps this will decrease the likelihood of another company scooping it up. Etelos seems to want control of its own destiny.

As for the future, the Etelos president says that it is going to focus on getting the knitting right and delivering on the company's promises. "There's tremendous opportunity for companies to get together and take apps like CRM and develop hosting environments and support environments," Garon says. "We bring all that together to build a platform agnostic distributing environment to come together in an open standards way."

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