NetManage Picks-Up Wall Data

Host-connectivity specialist NetManage Inc. (Cupertino, Calif.) is hoping that there's still a market for terminal-based PC-to-host connectivity solutions in the age of the Internet, especially after the company spent $94 million to acquire PC terminal emulation software specialist Wall Data Inc. (Bellevue, Wash).

In late October, both companies confirmed that NetManage was slated to acquire Wall Data for approximately $94 million. However, industry analysts have mixed feelings about the prospects of the merger, which some read as a step backwards --a return to the well-worn PC-as-dumb-terminal concept--in the midst of the Internet age.

Wall Data is known primarily for its Rumba brand of PC-to-host connectivity solutions, which are deployed as terminal front-ends for Unix and IBM-based AS/400 servers and System 390 mainframes. NetManage provides connectivity solutions for a variety of hosts and platforms.

NetManage may have acquired Wall Data simply for the visibility and mindshare that its Rumba product enjoys among enterprise IT departments, according to Darcy Fowkes, research director with Boston-based Aberdeen Group. "Clearly it was attractive to NetManage, and I think that NetManage needs Wall Data's customers," Fowkes suggests. "NetManage needs the Rumba product, if only because it's so well known."

The client-to-host connectivity space has taken a beating recently as more and more organizations opt to put Web browser front ends on host-based applications. In the past, these applications were usually accessed by 3270 or 5250 dumb terminals or by PCs equipped with terminal emulation software, such as those produced by Wall Data.

"[In past surveys], IT decision-makers [polled by IDC] indicated that they planned to put Web-based front ends on these important applications rather than continuing to use terminal emulation software," says Dan Kusnetzky, director of worldwide operating environments with IDC (Framingham, Mass.) "This means that these end-user organizations are planning to update their middleware--transaction processing monitors, etc.--to use the versions which support browser-based clients."

During much of 1999, Wall Data was besieged by a series of financial setbacks stemming from the shrinking demand for solutions in its bread-and-butter client-to-host connectivity market segment. In August, for example, the company divested itself of its 10 percent equity in XML developer DataChannel (Bellevue, Wash.) in order to raise money. Around the same time, Wall Data put its Cyberprise products--intended as a Web-based information portal to back-end legacy systems--up for sale.

Finally, just four days prior to its acquisition by NetManage, Wall Data founder and CEO John Wall announced his resignation. On the same day, the company announced an anticipated operating loss of between $11.5 million and $12.5 million for the first quarter of fiscal year 2000.

For its part, NetManage has attempted to recast itself as an e-business specialist. In March of 1999, for example, the company unveiled its eN2000 strategy, an initiative to offer solutions for server-based connectivity, Web-to-host and application integration server implementations. Company sources say that the combined NetManage/Wall Data will heavily leverage technologies from both of its constituent parts to assist enterprises that want to transition to e-business solutions.

NetManage also indicated that the aggregate NetManage/Wall Data will continue to provide client-to-host connectivity solutions such as those traditionally supplied by both companies. In addition, sources say, NetManage hopes to increase its presence in the burgeoning Web-to-Host connectivity market.

Aberdeen's Fowkes says that despite all of the fallout surrounding its acquisition by NetManage, Wall Data acted in the best interest of its customers. "They've been very loyal to their customers," she maintains. "Wall Data really had an incredible focus and they certainly showed some real loyalty to their brand by repositioning the company. Even though they put [the company] up for sale, they did a great job of showing the product off."

NetManage's president and CEO Zvi Alon says that his company's acquisition of Wall Data was prompted by a desire to increase its presence in the explosive market for e-business solutions. "With the acquisition of Wall Data, we are continuing to further our strategy of market leadership while increasing our presence in the new and growing e-Commerce and e-Business markets," Alon comments. "This move will strengthen the position that we established as the first single source supplier of advanced PC and Web-based connectivity solutions."