New Parents for Two Sterlings

February could be described as a Sterling month for acquisitions. First, Sterling Software Inc. (www.sterling.com) was acquired by Computer Associates International Inc. (CA, www.ca.com). Then, within days, Sterling Software's e-commerce/electronic data interchange (EDI) spin-off, Sterling Commerce Inc. (www.sterlingcommerce.com), was absorbed by telecommunications giant SBC Communications Inc. (www.sbc.com).

Computer Associates says its $4 billion acquisition of Sterling Software extends its arsenal of software and services to build, deploy, manage, and secure e-business solutions. A large part of the product assets Sterling brings to the table include its COOL series of development tools.

Integration and overlap with other product lines need to be worked out, analysts warn. "CA is still swallowing the large summer acquisition of Platinum Technology," notes Michael Dortch, senior research analyst at Robert Frances Group Inc. (RFG, www.rfgonline.com). "While the Sterling buy further broadens CA's product mix, integration between the multiple product lines will take time to work out."

Sterling's Java and portal development tools may make the acquisition a real plus for CA. Both CA and Sterling, "Recently shifted focus to the e-business infrastructure," Dortch notes. "While the shift may be more to appease Wall Street than customers, Sterling offers CA some nice offering in the enterprise portal space and Java development."

In particular, Sterling's COOL:Joe for Java development, launched last year, is competitive with leading tools such as IBM Corp.'s (www.ibm.com) VisualAge, BEA Systems Inc.'s (www.beasys.com) Visual Cafe, and Inprise/Borland Corp.'s (www.inprise.com) JBuilder.

Representatives at CA say the company intends to integrate Sterling's COOL suite and CA's Jasmine ii information infrastructure to offer a sophisticated enterprise application integration (EAI) tool. CA also intends to build on Sterling products with its information visualization, Neugents neural network technology, and infrastructure management solutions.

Sterling Software claims an installed base of more than 20,000 sites -- including 90 percent of Fortune 100 companies.

The merger will create one of the industry's largest storage management technology vendors, with solutions covering a range of platforms, from OS/390 mainframes to laptops. The combined operation, however, faces fierce competition in this market. "For the systems management solutions, there is not much exciting in the purchase," Dortch says. "Sterling's products are acceptable but are not leaders."

Almost simultaneously, SBC Communications announced its intention to acquire Sterling Commerce for $3.9 billion. Sterling Commerce was originally launched as Ordernet, a value-added network and electronic data interchange (EDI) provider, before it was purchased by Sterling Software in the early 1990s. Sterling Commerce was spun off as an independent public company in 1996, and has since expanded its offerings to include Internet-based EDI and transactions. Recently, the company had been concentrating on providing network and backbone infrastructure services for building online trading communities.