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Portfolio | Ingres News

Red Herring

November 7, 2005

Buyout Firm Takes Ingres Stake

Computer Associates and Garnett & Helfrich divest CA’s open-source database unit. Software developer Computer Associates teamed on Monday with Garnett & Helfrich Capital, a private equity firm specializing in venture buyouts, to divest CA’s Ingres open-source database unit into an independent entity known as Ingres Corp.

Garnett will become the major shareholder in Ingres Corp., in which CA has acquired an ownership stake and the right to appoint a member to the Ingres board of directors. CA also plans to continue to work with Ingres on product development, industry partnerships, and marketing activities.

CA has been reexamining its diverse array of software products over the past year in the wake of a management shakeup and accounting scandal (see NYFIX, CA Restate Results). Divesting Ingres will enable the Islandia, New York-based company to focus better on core strategic markets, such as enterprise systems and security management.

“This move by CA with Garnett & Helfrich will make waves in the commercial database market for the incumbent vendors,” said Robin Bloor, a partner in the research and consulting firm Hurwitz & Associates. “This is the kind of well-backed focused entity that customers and industry leaders want to work with as they expand their commitment to open source.” Shares of CA were down $0.07 to $28.89 in recent trading.

CA hopes to hone its focus and repair its financials with the move. In late October, the company reported a second-quarter profit of $41 million, or $0.07 per share, on revenue of $942 million (see CA Q2 Profits Rise 14%).

“This partnership with Garnett & Helfrich represents a step toward rationalizing CA’s solutions portfolio and provides Ingres with the dedicated resources and focus to ensure its future success,” said John A. Swainson, CA’s chief executive.

“During the past year, CA has been looking closely at its solutions portfolio and deciding how to best focus investment dollars on growth areas,” he added.

Open-Source Move

CA bought the Ingres technology in 1994 when it purchased the ASK Group. Ingres originally began as relational database management software at the University of California at Berkeley 30 years ago. In 2004, CA released the software to the open source community.

“Open-source software is being widely embraced by enterprise IT organizations seeking to optimize their flexibility, time to innovation, and return on technology investments,” said Terry Garnett, managing director of Garnett & Helfrich Capital. He will become interim CEO and chairman of the board at Ingres.

Mr. Garnett formed his private equity firm with David Helfrich in 2003. Prior to that time, he spent eight years at Venrock Associates, where he was an early investor in Siebel Systems, Check Point Software, and Niku, which CA acquired in June for $350 million (see CA Acquires Niku for $350M).

Before he entered the venture capital business, Mr. Garnett was senior vice president of worldwide marketing and business development at Oracle, where he reported directly to Oracle CEO Larry Ellison.

Joining him on the Ingres board will be another former Oracle executive, Michael Rocha, along with Mr. Helfrich and Mark Barrenechea, chief technology architect at CA.

Enterprise Push

Mr. Garnett sees Ingres and its executive team competing against Oracle, IBM, Microsoft, and Sybase in the enterprise database business by pushing the advantages of open source for large corporate customers.

“A lot of us grew up in the database business, and we found a lot of frustration in the ecosystem, with everything from best practices to how you do business with the closed source database players,” he said. “They have an extremely powerful franchise, and the power has been with the vendor. Customers have struggled with where they can go in the marketplace and have an alternative.”

He intends to work with other technology companies such as SAP, EMC, and Sun Microsystems in giving them alternatives to what he calls the “gang of four.”

Ingres isn’t the only open source database system, however, and MySQL has continued to gain support in the marketplace. Mr. Garnett acknowledges the growing success of MySQL, but thinks it lacks some of the capability needed to compete against the larger vendors in the Fortune 500 market.

“MySQL has done a good job of pioneering and getting the market sensitized to open source,” he said. “If you’re Microsoft or IBM, you can put into the market a cheap open source product [to compete with MySQL], but it’s going to be harder to do that with us. We can go up against the top of the line with their product base.”

He also pointed out that Oracle has recently acquired two companies, TimesTen and InnoDB, which provide some of the underlying technology used by MySQL.

“MySQL has bet on those two pieces for the next generation of their database,” said Mr. Garnett. “Now they will have to rely on Oracle for that technology, and it will be difficult to move up the food chain. It’s brilliant on Oracle’s part, and my hat’s off to Larry [Ellison]. They will have to change the name now from MySQL to MyOracle.”

Copyright 2005 Red Herring