Platinum Software Will Buy Competitor for $92 Million

By P.J. HUFFSTUTTER

Oct. 14, 1998 12 AM PT

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TIMES STAFF WRITER

In another sign that it has left its troubles far behind, Platinum Software Corp. said Tuesday that it agreed to buy rival DataWorks Corp., a San Diego-based maker of business management software, for about $92.8 million.

The deal, the largest Platinum acquisition in recent history, will expand the Irvine company’s customer base, triple its staff and improve its access to in-house research. Platinum said it will issue 11.5 million new shares of common stock to pay for the deal.

Platinum and DataWorks make software to streamline operations at midsize corporations, primarily companies with annual revenue under $500 million.

Platinum said it will take an undisclosed charge in the fourth quarter for the acquisition.

“We see this as an opportunity to accelerate our growth and build on opportunities in our own backyard,” said company spokesman Guy Hicks, who noted that the combined clientele base is about 10,000 customers.

Company officials said the companies’ combined staffs total 2,000 but that some layoffs will occur when Platinum completes the acquisition. They declined to say where the job cuts will come from.

DataWorks has about 1,320 employees worldwide, with about 135 based in the company’s offices in Irvine. The company’s Orange County facility handles a mix of marketing, support, sales and product development.

Platinum has a worldwide staff of 650, with 270 employees based in its headquarters in the Irvine Spectrum.

“There’s not a lot of overlap in their customer bases,” said James Pickrel, a senior analyst at Hambrecht & Quist. “But this is a competitive field, and it’s unclear what the combined company’s plans are, going forward.”

Under the terms of the agreement, Platinum will swap 0.794 of a share for each share of DataWorks stock. That works out to $6.45 a share for DataWorks’ shares, about 21% above the San Diego company’s stock price.

The deal was announced after the markets closed. Platinum’s stock price fell 25 cents a share on Tuesday, closing at $8.13. DataWorks stock remained unchanged at $5.38 a share.

The deal, pending regulatory approval, is expected to be finalized by the end of this year. After the deal is complete, DataWorks will become a wholly owned subsidiary of Platinum. Stuart W. Clifton, DataWorks’ chief executive and president, will become vice chairman of Platinum and a director.

Platinum, which was rocked by an accounting scandal in 1994, has enjoyed strong growth in the last few years. Analysts attribute the company’s revival to turnaround specialist L. George Klaus, who joined Platinum’s executive team in 1996. Indeed, the company’s stock recently absorbed a one-day plunge of 37% amid rumors--since denied--that Klaus might be departing.

For the fiscal year ended June 30, Platinum reported earnings of $13.35 million on $98.49 million in revenue.

For 1997, DataWorks reported a net loss of $800,000 on revenue of nearly $147 million, compared to a net profit of $4.5 million on revenue of $117 million for the previous year.

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DataWorks Acquisition

Platinum Software has announced that it agreed to buy DataWorks Corp., a San Diego-based software development firm. Details on the companies:

PLATINUM SOFTWARE

Headquarters: Irvine

Business: Software development

Chairman/Pres./CEO: L. George Klaus

Employees: 650

Status: Public

Exchange: Nasdaq

Fiscal 1998 sales: $98.49 million

Fiscal 1998 net income: $13.35 million