The recent announcement by Computer Associates that it intends to exercise its option to acquire the 50% of Newtrend L.P. it doesn't already own raises a whole host of questions that neither CA Chairman Charles Wang, The Newtrend Group President Robert King--whose firm owns the other half--nor anyone else associated with the troubled joint venture will comment upon. But you can bet that Newtrend customers will anxiously be awaiting answers.
Newtrend L.P. was created three years ago by CA and The Newtrend Group, an Orlando-based group of investors. Legal ownership of all of the original Newtrend's products--including those that CA initially had no involvement with--was assumed by the joint venture at the time of its creation. Newtrend's day-to-day activities have been handled by chief operating officer Robert Lund and his Orlando-based management team.
That the relationship between CA and TNG had become acrimonious became evident when CA sued TNG a year ago, alleging that the latter breached the joint venture contract by ignoring CA's input. As a result, Islandia, NY-based CA is now seeking complete control. TNG president Robert King was named as a defendant in the case, which is pending. CA's move to buy out its estranged partner comes from a contractual right of first refusal in the joint venture agreement, which the company says it exercised after TNG had solicited an offer from an unnamed third party to acquire all of Newtrend L.P.
Neither CA nor TNG would comment upon the third party's offer, although a TNG spokeswoman initially said that CA was answering all questions for both companies. Last year, Lund said Newtrend was planning an initial public offering, and the joint venture contract spells out the manner in which an IPO would proceed. A former Newtrend employee says the company had negotiated an underwriting deal with a Wall Street firm, and that triggered the CA counteroffer.
Given that the joint venture owns all of Newtrend's products, Wang's attempted buyout may not be limited just to Infopoint, the set of commercial banking applications CA owned before it teamed up with TNG. Although neither party would comment, the buyout might also include Miser2, the thrift software package created by the pre-joint venture Newtrend, and other products created since, such as the Credit Union Business Environment, or CUBE. That would leave TNG investors with only a shell corporation and no products.
Given the strain between CA and TNG, one has to wonder how many people from the joint venture would be willing to work for CA--especially since Wang has a reputation for being intimidating and difficult to work for. For his part, King had been keeping a low profile even before the suit was filed, allowing other executives to make public statements concerning the firm's products and customers.
It's unclear why CA, a giant software firm with more than $2 billion in yearly revenue, would want a smorgasbord of mostly unrelated products. The company appeared to be getting out of vertical markets like banking when it entered into the joint venture, although a spokesman now says that CA never intended to give that impression. Assuming that a sale of TNG's stake goes through, customers will be waiting to see whether CA is fully committed to banking--or just looking for the most expedient way to settle a lawsuit.
CA's only public comment would seem to indicate the former. "Virtually all of Newtrend's Infopoint clients use other CA solutions," the company said in a statement. "With 100% control of Newtrend, we're now in a position to make sensible long-term decisions and offer banking software clients the product synergy and integration they deserve."
Also caught in the cross fire is Newtrend's latest product, the Client/Server Banking System--or CSBS--which is intended to run on Microsoft Corp.'s Windows NT operating system. Rob Murray, marketing manager for ProLogic Corp., the Canadian firm that is helping Newtrend develop CSBS, says the work is going forward on schedule. But a Microsoft marketing executive declined to comment on the status of the CSBS.
