e-Literate

Present is Prologue

Tag: Datatel

  • The Datatel-SunGard Higher Education Merger

    This is a guest post from Jim Farmer, Chairman of Sigma Systems, Inc.

    [Editor’s note: I have had this post from Jim for a while now and am only now getting a chance to publish it. Apologies to Jim and to you.]

    On August 4th Hellman-Friedman LLC filed with the Security and Exchange Commission a planned press release announcing the merger of Datatel and SunGard Higher Education. The SEC filing did note the merger excluded the SunGard Higher Education K-12 Education business, which had been combined with higher education only a few months ago.

    Hellman-Friedman LLC, a private equity firm, and partners own Datatel. Hellman-Friedman was offering $1.775 billion for the higher education part of SunGard Higher Education to create a merged firm..

    SunGard Inc. acquired Systems and Computer Technology (SCT) in February 2004. In March 2005 SunGard Inc. itself was acquired by private equity firm Silver Lakes Partners.

    At that time Campus Technology’s John Savarese summarized the issue:

    In a financial world in which takeovers are often motivated by the desire to achieve economies through radical restructuring or cost-cutting, or where buyers purchase a company because they see the opportunity to quickly sell off assets, customers often have reason to be nervous. And higher ed customers have an added reason to worry: Running a university or college is not just another vertical market; successful software vendors have taken years to tune their offerings to the special needs and operating culture of the campus. Understandably, there is always the concern that new owners may not understand the importance of doing business in the native language of academe.

    Another issue. On April 10th 2011 Peter Thiel—a co-founder of payPal, hedge fund manager and venture capitalist—said “We’re in a Bubble … It’s Higher Education.

    Tech Crunch’s Sarah Lacy reported

    Instead, for Thiel, the bubble that has taken the place of housing is the higher education bubble. “A true bubble is when something is overvalued and intensely believed,” he says. “Education may be the only thing people still believe in the United States.”

    “Like any good bubble, this belief– while rooted in truth– gets pushed to unhealthy levels.”

    A look at the numbers may suggest Hellman-Friedman alternatives.

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  • SunGard HE and Blackboard Acquisitions: Compare and Contrast

    UPDATE:  In the section on ‘Cash Cow vs. Growth Potential’, my choice of words could have caused misunderstanding.  I did not mean to equate Operating Income with Cash Flow, and my choice of the word ‘cash’ in this section should really have been ‘income’, as my analysis was obviously based on Operating Income.  I have made this correction below.  My apologies for any misunderstanding.

    Consider the recent news this summer that private equity firms have agreed to acquire both SunGard Higher Education (SGHE) and Blackboard in separate deals:

    • Two market leaders in technology solutions for education,
    • both generating revenues of several hundred million dollars per year,
    • both business strategies at risk due to eroding market share in their core business since 2007,
    • both facing challenges to integrate product lines and offer a clear road map for customers,
    • and both sold to private equity firms for more than $1.6B.

    SunGard Higher Education (SGHE) and Blackboard – brothers in arms.

    At first glance, there are some strong similarities between the acquisition perspectives of both market leaders, but if you look deeper, the differences provide a good insight into the future of technology markets for higher education.  These differences can explain why the ERP market seems to be consolidating with fewer choices while the LMS and educational technology market seems to be expanding with more choices.

    Cash Cow Income Machine vs. Growth Potential

    During research for this post, I was surprised to find out how much cash income that SGHE generates and how close Blackboard has come to SGHE’s revenue numbers.  While Blackboard has seen its revenue increase due to corporate acquisitions of its own, it has only had a combined operating income of $26M over the past 3 years.  In that same time, SGHE has seen its revenue decrease by almost 10%, but it has had a combined operating income of $399M.

    It is somewhat difficult to compare the financials of the two companies, as they employ different accounting methods, so use the following table to see the big picture rather than the details.  I have attempted to show total revenue (numbers are fairly solid) and operating income (not as solid), while ignoring provisions for income taxes.  This data is based on SunGard’s annual report for 2010 (p. 36 as printed) and Blackboard’s annual report for 2010 (p. 26 as printed).

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  • IMS Learning Information Services: The State of the Union

    Regular e-Literate readers know that I am a big booster of the IMS Learning Information Services specification. (For an overview of the basics of the specification, see my posts here, here, and here.) There has been a lot of news recently about adoption, and I thought it would be worthwhile to pull together a unified post of who is doing what. I’m going to divide vendors and projects into a few different categories based on their released code, public commitments, etc.

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