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Thursday, December 29, 2005 - Page updated at 12:00 AM

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Acquisition bid targets Onyx in Bellevue

Seattle Times business reporter

A Hong Kong-based software company made public Wednesday its proposal to acquire a controlling interest in Onyx Software in Bellevue.

CDC Corp., a Nasdaq-traded company formerly called chinadotcom, said it has offered its software assets and $50 million in cash in exchange for a majority stake in Onyx, which would remain a public company.

Onyx, which makes customer-relationship management software, will consider CDC's offer, Chief Marketing Officer Todd Chambers said Wednesday, but he added that Onyx has been performing well this year and "there is no compelling reason to sell the company."

Shares of Onyx stock Wednesday were up 19 cents, or 5.1 percent, to $3.95.

Already the companies appear to have run into communication problems and differing views of the software industry.

CDC executives said they had been trying to arrange a call or meeting with Onyx for several months and went public with their offer out of frustration.

CDC wanted to get the message of its interest in Onyx out to shareholders, said Rick Marquardt, president of CDC Software in Atlanta, a unit of the Hong Kong company.

"Meetings were scheduled and then canceled," he said. "I do think that a courtesy call and chance for half-an-hour discussion is not too much to ask for."

Chambers countered that Onyx executives didn't receive CDC's proposal until Dec. 6 and were taken aback by CDC's statements Wednesday.

"The only contact we're aware of was this unsolicited proposal and there was very little detail in it," Chambers said. "We needed to understand this better and a meeting to do that was scheduled."

Onyx, with about 280 employees, has a market capitalization of about $70 million, compared with CDC's 2,000 employees and market value of $350 million.

Onyx lost $2.6 million last year on sales of $57.6 million. It has struggled in recent years but produced double-digit license growth and improved operating results over the past three quarters.

CDC, which started out as a Chinese Internet portal, has made a string of acquisitions in the past few years to move into enterprise software. CDC also is a shareholder of Onyx, but it owns less than 5 percent, Marquardt said.

CDC's two largest shareholders are Asia Pacific Online, a Cayman Islands company owned by the family of CDC founder Peter Yip, and the Xinhua News Agency, the press agency of the Chinese government. Asia Pacific Online owns 17.5 percent of CDC and Xinhua owns 6.6 percent.

CDC posted a $9.3 million loss last year on sales of $183 million.

In 2003, CDC, then chinadotcom, acquired IMI of New Jersey for $50 million. Next, it fought Onyx to acquire Vancouver, B.C.-based Pivotal, spending $56 million, and bought Ross Systems of Atlanta for $65.7 million.

It remains to be seen whether CDC will follow Oracle's example and make a hostile takeover bid for controlling interest in Onyx.

"We'll have to wait to see what the response from Onyx is," said Marquardt, who joined CDC from Ross. In light of Oracle's acquisition of PeopleSoft and Siebel Systems, Onyx Chief Executive Janice Anderson has spoken out against "megavendors" and in defense of more choices provided by smaller "best of breed" software companies, as she described Onyx.

"Many customers don't want to buy another massive solution suite in order to advance their business goals," she said in September.

CDC has taken a different approach, bolstering its holdings in a drive to compete with Oracle and SAP.

Onyx could help it enter the government, health care and insurance marketplace and provide a global distribution and partner network.

"In the enterprise application space, size does matter," Marquardt said.

Kristi Heim: 206-464-2718 or at kheim@seattletimes.com

Copyright © 2005 The Seattle Times Company

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