ASNA, one of the oldest System i independent software vendors, has been bought by BluePhoenix Solutions, a software and services vendor with a history in the mainframe market. The letter of intent covering the merger of the two companies was announced by BluePhoenix at the beginning of August, a day after the publicly-held company reported its financial results for the second quarter. 

The consideration being paid comprises a cash payment of $7 million and additional consideration to ASNA’s shareholders if certain profit and revenue targets are achieved by ASNA in 2007, 2008 and 2009. The additional consideration will be calculated incrementally based on a multiple of between 6.5 to 8 times ASNA’s average net profit in the years 2008 and 2009, provided the average annual net profit during those years exceeds $1.5 million.

ASNA (Amalgamated Software of North America) develops and markets visual programming and systems software for AS/400, iSeries, and System i servers. Its product list includes Visual RPG for .NET, an RPG compiler for building web services and broader service oriented architecture applications; DataGate, for System i database access from Windows and .NET applications; and Monarch, a tool that automates the transformation of RPG programs or entire applications to the Microsoft’s .NET programming model for Windows.

“The fully-automated Monarch migration solution directly addresses the 750,000 AS/400 computers in major business and government organisations across the world, a market estimated to be worth at least $75 billion,” says BluePhoenix.

“ASNA is a great fit for us, and will significantly contribute to our future growth,” says Arik Kilman, BluePhoenix CEO. “The AS/400 market is a huge one, and we will pursue it very aggressively. We believe ASNA will add approximately $1million to our revenues this year, so we are raising our revenue forecast to $86.5 million. We also believe that in 2008, ASNA’s contribution will be notably greater.”

“The deal was finalised on Friday and we are delighted as it is a very good fit for both our companies,” says Derek Cooper, ASNA Europe.

As ASNA’s software portfolio is designed for organisations inclined to move their application development forward in the Windows environment, the company, like others with similar products, has sometimes disagreed with IBM, which took a pro-Java development approach in the OS/400 and i5/OS customer base. Despite the tension, ASNA has been a long-time IBM Business Partner, and its products are certified under the ServerProven program and also form part of System i’s Developer Roadmap. ASNA is also affiliated with Microsoft through various partnerships, and is a founding member of Microsoft’s Midrange Alliance Program.

Although the two firms have built their software businesses around different operating systems -- ASNA in the OS/400 and i5/OS market and BluePhoenix in the MVS and z/OS market -- the two companies are similar in their application modernisation goals of helping organisations implement more efficient, standardised IT systems that lower programming and maintenance expenses. Both companies emphasise their software also offers benefits relating to shorter time-to-market, easier application integration, consolidation of subsystems, and the capability to expand functionality while preserving proprietary business information.

The BluePhoenix application portfolio is similar to that of ASNA. It includes IT Discovery, a product for tracking system inventories, resources, and interrelationships; LogicMiner, a COBOL business logic analysis tool; AppBuilder, an application development infrastructure and tool used to build, deploy, and maintain applications and generate code for COBOL, Java/J2EE, and C#; and Nebula, an application repository that spans platform boundaries and development tools. Central to its business is the application and database migration package that includes assessment and project impact analysis. BluePhoenix also offers platform migration and re-hosting services with an emphasis on J2EE, .NET, Linux, and Unix destinations.

ASNA, based in San Antonio, Texas, has been in business for over 25+ years, has UK offices in Guildford and more than 20 international distributors. BluePhoenix was founded 20 years ago, is a member of IBM’s PartnerWorld for Developers and is headquartered in Herzlia, Israel, and has offices in the US in Cary, North Carolina, and 14 other locations globally.

In its most recent financial report, for the second quarter ended July 31, BluePhoenix reported sales of $21 million, up 27% compared to 2006. That Q2 sales figure is also a 5% increase compared to the $20.1 million of Q1 2007. This was the tenth consecutive quarter of growth for the company. Recent market capitalisation for BluePhoenix was $194 million; the company ended the quarter with $19 million in cash and $30.8 million in debts. Its cash pile has been growing and its debts falling over the past several quarters, which is why it can make acquisitions. BluePhoenix is paying for ASNA out of available cash.

Frank Booty, industry reporter.