Informatica Corporation is the leading provider of business analytics software that helps global companies monitor and manage the performance of key business operations across the enterprise. Informatica was formed in 1993 with its headquarters in California. The company has around 1,900 employees and provides high-value services to more than 4,100 customers across the globe. Informatica’s business analytics products span the entire ‘build to buy’ spectrum, enabling customers to buy packaged analytic applications or build their own best-of-breed data warehousing solutions—whichever approach best suits their requirements and resources. More than 1,500 companies worldwide are using Informatica data integration software to build and manage data warehouses. Leading technology innovators, including Motorola, ConAgra, Brunswick, Brocade, Hewlett-Packard and GE, are using Informatica packaged analytic applications to successfully monitor and optimize business performance. 1 Informatica is reported to be the most recognized data-integration tools brand, and as having a strong leadership position.
2
Informatica’s leadership team is singularly focused on developing and delivering data integration software and services that help enterprises improve operational efficiency, acquire and retain customers and enhance competitive advantages.
3
More than 4,100 leading companies and government organizations worldwide rely on Informatica’s software and services to access, integrate and trust all their information assets to help them reduce costs, improve operational efficiency and enhance their competitive advantages.
4
The company through its continuous innovations has developed great strength to provide unique value propositions to its customers. It has developed technology solutions—Application ILM, B2B Data Exchange, Cloud Data Integration, Complex Event Processing, Data Aggregation, Data Governance, Data Integration for Salesforce CRM, Data Migration, Data Quality, Data Synchronization, Data Warehousing and many more; business solutions—Governance, Risk and Compliance, Mergers and Acquisitions, Customer Acquisition and Retention; and industry solutions—Energy and Utilities, Financial Services, Healthcare, Manufacturing, Public Sector, Retail, Telecommunications and Transportation. A dedicated team of people possessing extraordinary expertise is always on the move to come out with unique business and technology solutions for its existing and prospective customers.
Informatica has invested significant time, money and resources since the company’s inception in 1993, developing innovative solutions used for data integration, data warehouse management and business analytics. The company’s strong focus on and commitment to R&D has netted the company a solid and growing patent portfolio. As with any other valuable asset of the company, Informatica has an obligation to its shareholders to protect the value of its patented IP to the fullest extent of the law.
The company’s IPO was 2.75 million shares at $16 each in 1999. The shares within a few months of listing were traded as high as $29.875. The shares traded on the Nasdaq market under the symbol ‘INFA’ were sold through an underwriting group managed by Credit Suisse First Boston Corp., BancBoston Robertson Stephens Inc, SoundView Technology Group Inc. and First Albany Corp.
Similar to Microsoft, Informatica too has been engaged in a number of patent-related litigations involving the company as plaintiff or defendant. As per the Stanford Litigation Clearinghouse, Microsoft appears in the title of 103 patent litigation trials—12 times as plaintiff and 91 times as defendant. Microsoft, a leader in IT software developments, has been the most profitable company. The company has been receiving substantial damages on account of patents. This does not include the number of times Microsoft has faced trial as ‘et al’—one of the numerous parties being sued and not the first party listed.
An example of a Microsoft patent infringement train wreck is the long-running Microsoft vs Eolas battle. In 1994, Eolas received a patent for a browser that supports plugins. Microsoft refused to pay a royalty with evidence that this functionality had already been invented. In 2003, Eolas sued Microsoft for patent infringement in a district court and won $520 million even though Microsoft earned no revenue from its browser. In 2004, the US patent office re-examined and rejected the patent; in addition, in 2004, Microsoft appealed to a court of appeals who remanded it back to the district court; in 2005, the patent office reinstated the patent and, in addition, in 2005, the Supreme Court refused to hear Microsoft’s appeal. In 2007, the patent office re-issued
Microsoft a patent that was the same as the Eolas patent. The patent office then ruled that the Eolas patent stood even though Microsoft had a near identical patent. Microsoft still had not had a re-trial in a district court but gave up and settled with Eolas for an undisclosed but substantial amount.
5
The company has been steadily growing as evident from the sales and net profits between 2006 and 2009. Its turnover has increased from $32.46 million in 2006 to $50.07 million in 2009, resulting in an average annual growth in turnover of 15.54 per cent. The net margins increased in the corresponding period from 11.15 per cent to 12.82 per cent. The company has been growing through a combination of organic growth and growth through acquisition.
6
Infringements on Litigations Patent
Informatica was awarded $25 million as compensation for patent infringement by Business Objects (NSDQ:BOBJ), as an outcome of a law suit that Informatica had filed more than four years ago against its business intelligence software rival.
7
Informatica’s patents relate to methods of transforming data in a data-warehousing application, the core technology powering ETL (extract, transform, load) software. The presiding judge, Elizabeth Laporte, ruled that Informatica had legally proved that Business Objects infringed Informatica’s patents in certain instances, according to court documents.
The California Jury ruled that Business Objects infringed Informatica’s patents by selling its Data Integrator Software, based on the ActaWorks technology it had acquired in August 2002. The jury unanimously determined that the patents are valid and that business objects’ infringement on Informatica’s patents was done wilfully. However, Business Objects, based in Paris and San Jose, California, plans to appeal the decision and emphasized that the legal process is still ongoing. Business Objects is seeking to have the patents invalidated by showing prior art preceding Informatica’s 1997 patent applications. ‘The court will consider that issue,’ Stine said in an interview. Unearthing prior art is a common method for invalidating patents and derailing lawsuits. The case will have broad ramifications for ETL software makers, who could face similar claims from Informatica if its patents stand. Some of the solution providers have been analysing the case in blogs. Australian consultant Vincent McBurney is analysing the twists and turns in what he has dubbed ‘the ETL trial of the century’, such as Business Objects’ subpoena of IBM to provide prior art evidence. Informatica has been filing suits for infringements against various companies for the various patents owned by it.8
1. Is it advisable for Informatica to file patents and enter into litigations involving huge cost or derive market benefits from its innovations and move over to the next innovation by the time competitors start entering into the same market by copying or developing similar products? Justify your answer.
2. What is the similarity in the business of Microsoft and Informatica?
3. What might have been the major reasons for accelerated growth of Informatica? What could have been the secrets of having come out with an IPO within 9 to 10 years of its formation?