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INFORMIX CORPORATION
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May 2, 2001
TO ALL INFORMIX SOFTWARE AND ASCENTIAL SOFTWARE EMPLOYEES
I am pleased to report that the feedback from customers, from employees and
partners has been overwhelmingly positive and supportive of the announcements
we made last week. Of course there were, and are, expressions of issues and
concerns, but it seems that most everyone is reassured by the various forms
of communications and responsiveness coming from Informix as well as from IBM.
There will continue to be significant communication both in writing as well
as through meetings and on web sites regarding product plans, employee
topics, and timetables, all designed to keep everyone well-informed and to
reconfirm the principles of securing customers' investments as well as
bringing most of Informix Software employees into IBM to continue and to
accelerate our mission of winning in the distributed database business.
We also recognize that last week's INN calls, especially the first one on
Tuesday, was not heard very well by many of the tied-in locations. I
apologize for that. There will be follow-up INN calls very shortly, and we
will make sure that the transmission is uniformly good so that the calls can
be more effective and interactive.
My note today is to provide some additional perspective to the topics of why
is the sale of our database business to IBM for $1 billion in cash a good
deal, why did the stock price go down, and what can be expected from the
stock price in the future. These have been questions expressed by some of
you, and it's important for everyone in our company to have a complete
perspective on these topics.
Why is this a good deal? Because it allows us to capitalize on the value of
our database business, eliminate the risk of that value deteriorating, while
providing future opportunities for many of our technologies and our
employees, and providing security and continuity to our customers.
At the same time, please consider that the price of $1 billion is:
- - 1.24 times last year's sales of $807 million
- - 1.36 times last quarter's sales annualized ($184 million times 4 is
$736 million)
- - 1.18 times 2001 projected sales based on the 5% expected growth rate that
we planned on in January 2001 (these projections were made of course prior to
all the economic bad news we've seen since)
and NOT included in the sale is the cash of the business ($250 million at end
of the first quarter), which we keep.
By the popular measures of value applied to comparable companies
(e.g. database companies like Sybase), this is a good, some would say very
good, price for this business.
This price also must be taken in the context of the fact that the database
business is dominated by Oracle, and pursued not only by us but by IBM and
Microsoft, all having considerably more resources applied to growing their
database business than we do. Recent trends, as you know, have been for them
to gain business while we have fallen behind. Although we have made good
progress in stabilizing our company since last summer and have recaptured
customer confidence, we have not yet been able to show convincing growth,
while our competitors continue to grow.
In software, stagnation usually results in lower revenues that in turn tend
to erode profits and cash flow. This raises the risk of diminishing the value
of our database business, and of disrupting and demotivating our customers,
employees, and stockholders.
It is a tremendous testimonial to the people of Informix Software that our
database business has in fact recaptured stature and respect that has
resulted in the value we received and in the desire and commitment by IBM to
embrace much of our core technologies and most of our people in their
strategy to expand and grow within the database business. IBM has the
wherewithal to make it happen and with Informix Software in the family, their
chances of winning are measurably increased. It's win-win for everyone.
But the purchase price is NOT the only basis of value in this transaction,
particularly from the standpoint of the investor. It is important to
understand that the impact of this transaction on the company and its
potential value is based upon the COMBINATION of:
- - the potential of Ascential Software as a pure-play in the fast growth
market of Information Asset Management, with a leadership position in terms
of products, customers, and momentum, PLUS
- - its strategic alliance with IBM that represents an important endorsement of
our products and strategy and could give Ascential additional revenue growth
acceleration as IBM resells Ascential products, PLUS
- - $1 billion in cash (approximately what Ascential will have after all the
dust settles....... proceeds minus taxes plus current cash) which is a
substantial amount of resource and flexibility to apply to Ascential's
growth, PLUS
- - the impact of using some of that cash to take shares out of the market
(thereby reducing the number of shares outstanding which in turn leaves the
stockholder owning a larger piece of a smaller number of total shares).
So the value to the stockholder is in fact all those things taken together
......... owning a strongly positioned pure-play company in a large and high
growth market. All this is the outcome of the transaction of selling our
database business to IBM for $1 billion.
If this is such a good deal, why did the stock price go down? Here is what
market experts
(including some of our institutional investors and analysts who cover our
space) have been feeding back to us to help understand the increase in
trading volume and selling pressure on our stock last week.
Last Monday Informix was a company with the largest part of its business in
the database business, with slow growth, profitability and positive cash flow.
This is the profile of a company that appeals to "value" investors - mutual
funds, banks, and the like that try to find companies that are selling for
less than their true value in hopes that the market would ultimately
recognize that fact and price the company appropriately.
Our announcement on Tuesday effectively changed the profile of the company in
the minds of investors into that of Ascential, a smaller revenue base with
much faster growth potential in a newer but higher growth market segment.
Ascential fits the investment profile of a "growth" stock. There is a
different set of investors that are interested in growth stock companies.
What seems to happen in this type of situation in the short run is that some
of the value investors who own our stock determine that we no longer fit
their investment profile, and they sell the stock - usually quickly. The new
universe of growth stock investors whose investment discipline would lead
them to a growth stock like Ascential become interested, but they do not
usually make immediate purchase decisions. They will begin their analysis of
what is essentially a new company to them, and some of them will invest, but
in the weeks and months ahead.
The net result of this is that in the near term there is more stock (from
value investors) selling pressure than buying (from growth investors)
pressure. In the longer term of course, a stock price usually reflects the
impact of the company's actual performance as well as its expected
performance. In other words, it's all about execution and our ability to set
and meet (exceed sometimes) expectations of revenues and consequently of
profitability and resultant cash flow.
We do realize that there may be a difference of opinion with some of our
stockholders as to whether this transaction is a good deal for Informix, and
this may also have contributed to the selling pressure we have seen. In our
judgment, however, it was better to realize good and fair value for our
database business now, securing the investment of our customers and ensuring
ongoing potential for employees, and apply all focus, energy and resource to
growing Ascential, than to continue with both businesses and struggle through
the issues of the database business.
We believe we made the right tradeoff between risking a deterioration in the
value of our database business, which would damage the interests of our
stockholders as well as of our customers and employees, and focus on a growth
opportunity where our starting point is from the strength of Ascential's
position as described above.
The Information Management market that Ascential is in is the market of
software infrastructure to enable data from virtually anywhere to be used for
business intelligence and analytics and enterprise information. This is a
significant market characterized by high-growth demand for tools that make
data useful for information. Data warehousing,
content management, business intelligence and analytics are all subsets of
this market category. Ascential Software was $122 million in revenue last
year and is currently projected to grow by 35% to 40% this year and to reach
profitability in the fourth quarter of this year. Ascential has a leadership
position with its DataStage and Media360 products as well with its more than
1700 customers around the world.
So while our company will no longer be a database company for the reasons
described above, our company continues as a substantial operation with a
strategy to be the undisputed leader in a substantial market and with the
positioning and resources to have a real chance at making it happen.
And, Informix Software continues its mission as part of an enlarged and much
strengthened competitor with the positioning and resources to have a real
chance at challenging the database leaders.
So what about the future of our stock price? It will be a function of the
growth performance of Ascential, combined with the use we make of the cash to
accelerate growth on the one hand, and to reduce the shares outstanding on
the other hand. We now have sufficient funds to have flexibility that adds to
the strength of Ascential.
We have announced our intention to reduce the number of shares outstanding.
It is also understood in our industry that with the amount of cash we will
have, we can opportunistically consider acquisitions that are fully strategic
and accelerate our profitable growth. We have no specific acquisitions in
mind at this time, but there may very well be opportunities in the future
that we will be in a good position to act upon because of our resources.
As this story gets better known and as Ascential's track record of
performance continues to build as it has begun to these past two quarters,
investor interest can be expected to build as well. This potential continues
to be confirmed by discussions with analysts and investors we have and will
continue to have going forward. And, we have seen from our experience
together that consistent good performance is always eventually recognized by
the investment community, and choppy disappointing performance tends to
depress stock prices.
I recognize that those employees not continuing with Ascential may view the
outlook for our shares differently than those who will be contributing more
directly going forward, and not every Informix employee moving to IBM will
want to continue being a shareholder of Ascential Software going forward.
Our goal in providing the continued vesting and additional time to exercise
is to recognize your contribution in getting us to this point and the impact
of that contribution on the company's future potential, and to provide more
of an opportunity for you to realize future value from your investment in
Informix.
More time to exercise will provide you with an enlarged window of time,
well-past the immediate moments surrounding the transaction, within which you
can more comfortably determine the appropriate course of action for your
options, and within which you can
more comfortably evaluate the performance and potential of Ascential Software.
I hope this note is helpful in understanding the value and potential impact
of our transaction with IBM and puts into perspective the recent and
potential stock market reactions. Please give us feedback and we will make
sure all your questions and concerns are addressed. As always, if we focus on
the job at hand and achieve our objectives that lead to revenue growth
through providing value to the customer, then all our other goals for
ourselves as employees and for our company, including value of our shares,
will follow.
Thanks a lot for your dedication and support, and for your commitment to make
our mutual goals happen.
Best regards,
Peter
This announcement contains forward-looking statements that are subject to
numerous risks and uncertainties. Any statements contained in this
announcement, including without limitation statements to the effect that the
Company or its management "believes," "expects," "anticipates," "plans,"
"may," "will," "projects," "continues," "intends" or "estimates," or
statements concerning "potential" or "opportunity" or other variations
thereof or comparable terminology or the negative thereof that are not
statements of historical fact, should be considered forward-looking
statements as a result of certain risks and uncertainties. These risks and
uncertainties could cause actual results and events materially to differ for
historical or anticipated results and events. Investors and potential
investors should review carefully the description of risks and uncertainties
that, together with other detailed information about the Company, is
contained in the periodic reports that the Company files from time to time
with the Securities and Exchange Commission, including the Company's Form
10-K for fiscal year 2000.
The proposed transaction described above will be submitted to Informix's
stockholders for their consideration, and Informix has filed a preliminary
proxy statement concerning the proposed transaction with the Securities and
Exchange Commission, and will file a definitive proxy statement with the SEC
shortly. Stockholders are urged to read the preliminary proxy statement
regarding the proposed transaction, and the definitive proxy statement when
it becomes available, and any other relevant documents filed with the SEC, as
well as any amendments or supplements to those documents, because they will
contain important information. When available, the definitive proxy statement
concerning the proposed transaction will be mailed to all of our stockholders
and our proxy statement, as well as other filings containing information
about the Company, will be available, without charge, at the SEC's Internet
site (www.sec.gov). Copies of the proxy statement and the SEC filings that
will be incorporated by reference in the proxy statement can also be
obtained, without charge, by directing a request to the Company's Investor
Relations Department, 50 Washington Street, Westborough, Massachusetts 01581
(508-366-3888).
The Company and its directors and executive officers may be deemed to be
participants in the solicitation of proxies from Company stockholders in
favor of the proposed transaction. Information regarding the interests of the
officers and directors of the Company in the proposed transaction is set
forth in the preliminary proxy statement regarding the proposed transaction
and will be set forth in the definitive proxy statement regarding the
proposed transaction, when available. Information regarding the Company's
officers and directors that may be deemed participants in the solicitation is
included in the Company's most recent annual proxy statement as filed with
the SEC on a Schedule 14A.
- -c- 2001 Informix Corporation. All rights reserved. Ascential is a trademark
of Ascential Software, Inc. and may be registered in other jurisdictions. The
following are trademarks of Informix Corporation or its affiliates, one or
more of which may be registered in the U.S. or other jurisdictions: Informix;
DataStage; and Media360.
May 2, 2001
TO ALL INFORMIX CORPORATION STOCKHOLDERS
My note today is to provide some additional perspective to the topics of why
is the sale of our database business to IBM for $1 billion in cash a good
deal, why did the stock price go down, and what can be expected from the
stock price in the future. These have been questions expressed by some of
you, and it's important for our stockholders to have a complete perspective
on these topics.
Why is this a good deal? Because it allows us to capitalize on the value of
our database business, eliminate the risk of that value deteriorating, while
providing future opportunities for many of our technologies and our
employees, and providing security and continuity to our customers.
At the same time, please consider that the price of $1 billion is:
- - 1.24 times last year's sales of $807 million
- - 1.36 times last quarter's sales annualized ($184 million times 4 is
$736 million)
- - 1.18 times 2001 projected sales based on the 5% expected growth rate that
we planned on in January 2001 (these projections were made of course prior to
all the economic bad news we've seen since)
and NOT included in the sale is the cash of the business ($250 million at end
of the first quarter), which we keep.
By the popular measures of value applied to comparable companies (e.g.
database companies like Sybase), this is a good, some would say very good,
price for this business. This price also must be taken in the context of the
fact that the database business is dominated by Oracle, and pursued not only
by us but by IBM and Microsoft, all having considerably more resources
applied to growing their database business than we do. Recent trends, as you
know, have been for them to gain business while we have fallen behind.
Although we have made good progress in stabilizing our company since last
summer and have recaptured customer confidence, we have not yet been able to
show convincing growth, while our competitors continue to grow.
In software, stagnation usually results in lower revenues that in turn tend
to erode profits and cash flow. This raises the risk of diminishing the value
of our database business, and of disrupting and demotivating our customers,
employees, and stockholders.
It is a tremendous testimonial to the people of Informix Software that our
database
business has in fact recaptured stature and respect that has resulted in the
value we received and in the desire and commitment by IBM to embrace much of
our core technologies and most of our people in their strategy to expand and
grow within the database business. IBM has the wherewithal to make it happen
and with Informix Software in the family, their chances of winning are
measurably increased. It's win-win for everyone.
But the purchase price is NOT the only basis of value in this transaction,
particularly from the standpoint of the investor. It is important to
understand that the impact of this transaction on the company and its
potential value is based upon the COMBINATION of:
- - the potential of Ascential Software as a pure-play in the fast growth
market of Information Asset Management, with a leadership position in terms
of products, customers, and momentum, PLUS
- - its strategic alliance with IBM that represents an important endorsement of
our products and strategy and could give Ascential additional revenue growth
acceleration as IBM resells Ascential products, PLUS
- - $1 billion in cash (approximately what Ascential will have after all the
dust settles....... proceeds minus taxes plus current cash) which is a
substantial amount of resource and flexibility to apply to Ascential's
growth, PLUS
- - the impact of using some of that cash to take shares out of the market
(thereby reducing the number of shares outstanding which in turn leaves the
stockholder owning a larger piece of a smaller number of total shares).
So the value to the stockholder is in fact all those things taken together
......... owning a strongly positioned pure-play company in a large and high
growth market. All this is the outcome of the transaction of selling our
database business to IBM for $1 billion.
If this is such a good deal, why did the stock price go down? Here is what
market experts (including some of our institutional investors and analysts
who cover our space) have been feeding back to us to help understand the
increase in trading volume and selling pressure on our stock last week.
Last Monday Informix was a company with the largest part of its business in
the database business, with slow growth, profitability and positive cash flow.
This is the profile of a company that appeals to "value" investors - mutual
funds, banks, and the like that try to find companies that are selling for
less than their true value in hopes that the market would ultimately
recognize that fact and price the company appropriately.
Our announcement on Tuesday effectively changed the profile of the company in
the minds of investors into that of Ascential, a smaller revenue base with
much faster growth potential in a newer but higher growth market segment.
Ascential fits the investment profile of a "growth" stock. There is a
different set of investors that are interested in growth stock companies.
What seems to happen in this type of situation in the short run is that some
of the value investors who own our stock determine that we no longer fit
their investment profile, and they sell the stock - usually quickly. The new
universe of growth stock investors whose investment discipline would lead
them to a growth stock like Ascential become interested, but they do not
usually make immediate purchase decisions. They will begin their analysis of
what is essentially a new company to them, and some of them will invest, but
in the weeks and months ahead.
The net result of this is that in the near term there is more stock (from
value investors) selling pressure than buying (from growth investors)
pressure. In the longer term of course, a stock price usually reflects the
impact of the company's actual performance as well as its expected
performance. In other words, it's all about execution and our ability to set
and meet (exceed sometimes) expectations of revenues and consequently of
profitability and resultant cash flow.
We do realize that there may be a difference of opinion with some of our
stockholders as to whether this transaction is a good deal for Informix, and
this may also have contributed to the selling pressure we have seen. In our
judgment, however, it was better to realize good and fair value for our
database business now, securing the investment of our customers and ensuring
ongoing potential for employees, and apply all focus, energy and resource to
growing Ascential, than to continue with both businesses and struggle through
the issues of the database business.
We believe we made the right tradeoff between risking a deterioration in the
value of our database business, which would damage the interests of our
stockholders as well as of our customers and employees, and focus on a growth
opportunity where our starting point is from the strength of Ascential's
position as described above.
The Information Management market that Ascential is in is the market of
software infrastructure to enable data from virtually anywhere to be used for
business intelligence and analytics and enterprise information. This is a
significant market characterized by high-growth demand for tools that make
data useful for information. Data warehousing, content management, business
intelligence and analytics are all subsets of this market category. Ascential
Software was $122 million in revenue last year and is currently projected to
grow by 35% to 40% this year and to reach profitability in the fourth
quarter of this year. Ascential has a leadership position with its DataStage
and Media360 products as well with its more than 1700 customers around the
world.
So while our company will no longer be a database company for the reasons
described above, our company continues as a substantial operation with a
strategy to be the undisputed leader in a substantial market and with the
positioning and resources to have a real chance at making it happen.
And, Informix Software continues its mission as part of an enlarged and much
strengthened competitor with the positioning and resources to have a real
chance at challenging the database leaders.
So what about the future of our stock price? It will be a function of the
growth
performance of Ascential, combined with the use we make of the cash to
accelerate growth on the one hand, and to reduce the shares outstanding on
the other hand. We now have sufficient funds to have flexibility that adds to
the strength of Ascential.
We have announced our intention to reduce the number of shares outstanding.
It is also understood in our industry that with the amount of cash we will
have, we can opportunistically consider acquisitions that are fully strategic
and accelerate our profitable growth. We have no specific acquisitions in
mind at this time, but there may very well be opportunities in the future
that we will be in a good position to act upon because of our resources.
As this story gets better known and as Ascential's track record of
performance continues to build as it has begun to these past two quarters,
investor interest can be expected to build as well. This potential continues
to be confirmed by discussions with analysts and investors we have and will
continue to have going forward. And, we have seen from our experience
together that consistent good performance is always eventually recognized by
the investment community, and choppy disappointing performance tends to
depress stock prices.
I hope this note is helpful in understanding the value and potential impact
of our transaction with IBM and puts into perspective the recent and
potential stock market reactions. Please give us feedback and we will make
sure all your questions and concerns are addressed. As always, if we focus on
the job at hand and achieve our objectives that lead to revenue growth
through providing value to the customer, then all our other goals for
employees and for our company, including value of our shares, will follow.
Thank you very much for your dedication and support. We believe we have taken
the necessary steps to improve our company's positioning for long term
profitable growth, designed to build sustained value for our stockholders.
Peter Gyenes
Chairman and Chief Executive Officer
This announcement contains forward-looking statements that are subject to
numerous risks and uncertainties. Any statements contained in this
announcement, including without limitation statements to the effect that the
Company or its management "believes," "expects," "anticipates," "plans,"
"may," "will," "projects," "continues," "intends" or "estimates," or
statements concerning "potential" or "opportunity" or other variations
thereof or comparable terminology or the negative thereof that are not
statements of historical fact, should be considered forward-looking
statements as a result of certain risks and uncertainties. These risks and
uncertainties could cause actual results and events materially to differ for
historical or anticipated results and events. Investors and potential
investors should review carefully the description of risks and uncertainties
that, together with other detailed information about the Company, is
contained in the periodic reports that the Company files from time to time
with the Securities and Exchange Commission, including the Company's Form
10-K for fiscal year 2000.
The proposed transaction described above will be submitted to Informix's
stockholders for their consideration, and Informix has filed a preliminary
proxy statement concerning the proposed transaction with the Securities and
Exchange Commission, and will file a definitive proxy statement with the SEC
shortly. Stockholders are urged to read the preliminary proxy statement
regarding the proposed transaction, and the definitive proxy statement when
it becomes available, and any other relevant documents filed with the SEC, as
well as any amendments or supplements to those documents, because they will
contain important information. When available, the definitive proxy statement
concerning the proposed transaction will be mailed to all of our stockholders
and our proxy statement, as well as other filings containing information
about the Company, will be available, without charge, at the SEC's Internet
site (www.sec.gov). Copies of the proxy statement and the SEC filings that
will be incorporated by reference in the proxy statement can also be
obtained, without charge, by directing a request to the Company's Investor
Relations Department, 50 Washington Street, Westborough, Massachusetts 01581
(508-366-3888).
The Company and its directors and executive officers may be deemed to be
participants in the solicitation of proxies from Company stockholders in
favor of the proposed transaction. Information regarding the interests of the
officers and directors of the Company in the proposed transaction is set
forth in the preliminary proxy statement regarding the proposed transaction
and will be set forth in the definitive proxy statement regarding the
proposed transaction, when available. Information regarding the Company's
officers and directors that may be deemed participants in the solicitation is
included in the Company's most recent annual proxy statement as filed with
the SEC on a Schedule 14A.
- -c- 2001 Informix Corporation. All rights reserved. Ascential is a trademark
of Ascential Software, Inc. and may be registered in other jurisdictions. The
following are trademarks of Informix Corporation or its affiliates, one or
more of which may be registered in the U.S. or other jurisdictions: Informix;
DataStage; and Media360.