End Of Era: DEC Prepares To Sell Off Dectrade Unit

After spending more than five years flogging Dectrade and related products, Digital Equipment Corp. (DEC) looks like it may finally be bailing out of the trading software market.

Sungard Capital Markets Inc. looks to be the likely acquirer of Digital Capital Markets (DCM), the London-based dealing room systems unit of DEC. As TST goes to press, sources say negotiations between the two parties remain at an advanced stage. However, the sources caution that the deal could still fall through and that other potential buyers are interested in DCM.

The acquisition of DCM and the Dectrade system would give Sungard its second digital data distribution system targeted at front office market data users. In Nov. 1992, Sungard bought Stockholm-based Prosoftia which brought with it a front-office data distribution product called Blues. Sources say that Sungard has for some time wanted to build more of a business in the front-office market. They say the vendor had an interest in buying Teknekron Software Systems Inc. when that company was up for sale. Teknekron was subsequently bought by Reuters for $125 million (TST, Jan. 10)

Peter Shelton, DEC's director of capital markets worldwide, refuses to comment on the current developments. Another DEC official declines to comment, saying only that the situation is too "delicate" right now. A U.S.-based spokesperson for Digital says: "I can neither confirm nor deny that we are trying to sell" DCM.

Other U.S.-based DCM personnel -- including Rex Masonowicz and Ingrid Howe -- didn't return calls.

While DCM maintains an estimated installed base of 5,000 positions worldwide, DEC's recent financial difficulties have driven it to reorganize and to concentrate on stripping its organization back to its core business. Vertical market operations such as DCM have as a result been placed on the chopping block.

Digital took its first whack at the trading room system vertical market when it eliminated its Desisco unit last winter, bringing its operations under newly created DCM (TST, Feb. 21).

Apart from the existing user base -- and any revenues that may go along with it -- the purchase would give Sungard access to the digital distribution technology that DCM has developed over the past five years. DCM's Dectrade data distribution platform began life running only on DEC's Vax/VMS operating system (TST, Nov. 6, 1989) but has since been ported to run under Unix on a variety of hardware platforms. However, since the -- slow and painful -- cutover to Unix, DEC has landed few major trading room customers.

DCM has also recently introduced upgraded multi-platform dealer workstation products. In addition to its own products, DCM distributes third-party applications, such as Tempo, a deal-capture and position-keeping system from U.S.- based Tower Mountain Software (TST, March 22, 1993).

With Dectrade, Sungard might feel better placed for an attack on the distribution systems market than it has to date. Prosoftia's Blues -- which has since been renamed Devon Connect Rates -- is a Microsoft Corp. Windows PC-based product and as such has limited appeal; large dealing rooms have in the main shunned PC solutions and have equipped themselves with Unix workstation networks of the Dectrade variety. Indeed, Sungard officials say that Devon Connect Rates isn't being pushed as a generic data distribution platform, but rather as a source of real-time prices for Sungard's Devon range of derivative and capital market systems.

As Sungard aligns itself with the so-called open systems world -- it has ported its software to run in client/server networks using SQL databases and the like -- Dectrade could become an important component in the Devon architecture and in Sungard's plan to integrate Devon into customer environments. However, despite such compelling theory, whether the acquisition of Dectrade will provide much of a boost in practice is very much an open question.

Interestingly, a DCM acquisition would also bring Sungard into even more competition with rival ACT Financial Systems Inc. While the two companies have a long history of competition in the middle- and back-office areas, the addition of Dectrade would bring Sungard up against ACT's rival Citydesk product. While it began life as a Blues-like PC product, Citydesk has since been ported to run in Unix environments. (ACT, meanwhile, has been hedging its bets in other directions, reorganizing itself in a merger with BIS Banking Systems to place more emphasis on non-trading specific applications; TST, April 4).

If Sungard's DCM buy does work out, it wouldn't be the first time that Sungard has grown its business through acquisition. Indeed, Sungard, and its parent Sungard Data Systems Inc. (SDS), have a history of such moves. Sungard Capital Markets was acquired under its old name of Devon Systems International Inc. by SDS in 1987. SDS has since bought a number of financial services businesses, including Money Management Systems Inc., Phase 3 Systems Inc. and Shaw Data Services Inc. Over the last three years, a number of acquisitions -- Softbridge Capital Markets, ICCH Financial Markets Inc., Micro-Tech Financial Systems, Front Capital Systems AB and Prosoftia -- have bolstered the Sungard Capital Markets business.

But not all Sungard acquisitions have gone well. Since Sungard's purchase of Insurance Systems of America -- with its mainframe-based Oscars portfolio accounting system targeted at insurance company money management operations -- the vendor has watched that product's installed base gradually whither (Investment Management Technology, June 24).