Update: IBM buys Informix's database business for $1 billion

The acquisition would provide IBM with at least 120,000 new database customers, according to Brian Staff, vice president of marketing at Menlo Park, Calif.-based Informix. That total accounts for roughly 13% of the Unix database and data warehousing installed base and 5% of all database users, Staff said in an interview last week.

The deal also could help improve IBM's hand in the distributed database business, a key strategic priority for the company. IBM recently reported that its distributed database revenue grew 36% year-to-year in this year's first quarter, and executives today said the Informix acquisition will greatly increase IBM's standing in that part of the market.

The addition of Informix's database business "effectively doubles our position in the marketplace for distributed databases," said Steve Mills, senior vice president and group executive of IBM Software, during a teleconference. Altogether, he added, IBM expects to have more than 500,000 database users worldwide once the deal goes through.

The acquisition, which is due to be completed during the third quarter, will also add more than 2,000 database developers to IBM's payroll. Calling that a big advantage in "the war for talent" against competitors such as Oracle, Janet Perna, general manager of IBM's data management unit, said the company is "fighting to win. We are playing for first place."

IBM plans to integrate Informix's database operations and personnel into Perna's division and will continue to sell Informix's products through an integrated sales force. Likewise, IBM said it will maintain existing relationships with Informix users and business partners, including support for all current Informix products.

However, Perna said IBM's DB2 Universal Database will be the foundation for future products. "No customer will be forced to migrate to DB2," Perna said, but she added that the combined IBM-Informix sales force "will lead with DB2 for new customer acquisitions." In addition, some Informix technologies, such as its analytical tools, will be integrated into DB2.

The database sell-off comes as Informix is emerging from a massive corporate restructuring. Last August, Informix split into two independent operating companies: Informix Software, which focuses exclusively on databases, and Ascential Software Inc., which took over responsibility for its information management applications.

Informix officials said in recent interviews that they were optimistic the renewed focus on database technology would begin to pay off for the company. But analysts weren't so sure, citing concerns about the number of different database products that Informix was trying to maintain simultaneously.

"The problem with Informix was that it flip-flopped back and forth on its market positioning," Betsy Burton, an analyst at IDC in Framingham, Mass., said before the sale to IBM was announced. "Informix has still not come out with a very clear strategy on how they are going to reconcile the seven different sets of database code they now maintain," Burton said. "For that reason, we think they're going to lose market share over the next four years."

Larry Ellison, Oracle's chairman and chief executive officer, dismissed the deal with characteristic flair.

"What can I say?" he said, when asked about the deal during an unrelated press event Tuesday morning. "We have a billion dollars in cash. We could have bought them too but we were never really interested."

Oracle 9i, a major upgrade to Oracle's flagship database, is due to ship May 15, Ellison said. Customers who move away from Informix are more likely to switch to Oracle than DB2, in part because Oracle 9i has improved clustering features that make it more scalable than DB2, he asserted.

(Includes reporting from the IDG News Service.)