Oracle Corp., the giant data base software company, has agreed to buy financially troubled call-center-systems vendor Versatility Inc. for $12 million in cash, or $1.50 a share.
The deal, if approved by shareholders, would lift the cloud of uncertainty shrouding Versatility's future.
The Fairfax, Va., software developer was delisted by Nasdaq after it was forced to restate its earnings for inappropriately recording certain revenues in the fiscal year that ended April 30, 1997.
Versatility's customers include Mellon Bank Corp. and Sanwa Bank of California, but it had been adding virtually no new business.
Versatility could find a safer haven within a much stronger and multinational firm like Oracle, which is second only to Microsoft Corp. among independent software companies. Oracle employs 33,000 people and had revenues of $7.1 billion last year.
Versatility has 110 employees and most would probably stay on with Oracle.
Oracle, based in Redwood Shores, Calif., had intended to develop an outbound call-center system similar to Versatility's by April of next year.
If the deal is completed, Oracle could integrate Versatility's system within 120 days, saving it time and development money, said Oracle vice president Mark Barrenechea. The system could also help Oracle in its marketing to the financial services industry.
The software would help banks, insurance companies, and credit card marketers manage their telemarketing campaigns, Mr. Barrenechea said.
Oracle said it is confident that it has done the necessary due diligence on troubled Versatility and the shareholder lawsuits it is facing.
"This is a nice complement to our existing call-center applications," Mr. Barrenechea said. "We are very confident that we understand all of the risks."
Versatility's troubles began in February when it was forced to restate its fiscal 1997 revenues as $18.3 million, down from $27.4 million. That resulted in a net loss of $7.9 million, or $1.26 a share, rather than the previously reported profit of $1.9 million, or 12 cents.
In a Securities and Exchange Commission filing, Versatility, which gets 73% of its revenue from eight customers, said it expected the outlook for revenues and earnings to deteriorate further.
The acquired operation would become a part of Oracle's software applications business unit, which kicked off a marketing campaign this month with an anticipated cost of $25 million over the next 12 months.
Oracle is building software that can cull information from disparate data bases in an organization such as a bank. Executives would get information for profitability analysis and related decision-making.
Kathleen Khirallah, analyst at Newton, Mass.-based Tower Group, said Versatility's call-center software is "fairly robust and capable of doing the job for the banking industry."
"It certainly will be appealing to banking clients now that Versatility has the backing of an organization and management group like Oracle," she added. "It gives them credibility they had lost when they had to restate earnings."
Versatility's investors, however, had other opinions. On Internet message boards, they lambasted the company's management for saving their own jobs at stockholders' expense. The company went public in 1996, issuing 2.2 million shares at $15 each. The stock price tumbled in recent months, to $1.31.
"Thank you, Merrill Lynch," wrote one investor from Stockton, Calif., who called himself 'Sledder.' "Oh, and by the way, keep those great IPOs coming ... ." Merrill underwrote Versatility's IPO.
Versatility officials did not return phone calls seeking comment, nor were they quoted in Oracle's press release announcing the deal.
Peter Dunning, Oracle's senior vice president of applications, said Versatility's software would help give Oracle clients "a complete, 360- degree view of their customers."
