Sybase: More than Just a Database Company

If you ask most people about Sybase (SY), they think "database company." That is true, but not the whole story. Last year Sybase did about $700 million in database-related sales, but it is a lowly number four in category dominated by Oracle (ORCL), Microsoft (MSFT) and IBM (IBM), with upstarts like MySQL gaining momentum.

During a dinner with a few journalists this week, Sybase CEO John Chen discussed his vision for the company. He doesn't want to go into battle with his the much bigger database competitors. It's a fight he says he cannot win, and he is content to keep current customers happy and incrementally grow in areas where Sybase has been traditionally strong–telecom, financial services and the intelligence community. For example, 50 percent of all stock trades and 85 percent of settlements run off of Sybase databases, Chen said. Sybase also has a healthy market share in China and other Asian countries.

Over the last several years, Chen and company have been betting big on mobile infrastructure. "Six years ago, people said it was the biggest mistake. Nobody was making money from wireless," Chen said. Chen expects the mobile division to produce about $300 million of the $1.025 billion in revenue projected for 2007.

The messaging business is growing at more than 20 percent, Chen said, compared to 6 to 8 percent for the database business. It's harder to innovate and be backward compatible with databases. Mobile is new and wide open," he said.

Most of the company growth in wireless mobility has come via acquisitions. For example, in August 2006, Sybase acquired Mobile 365, a messaging infrastructure provider used by over 700 mobile operators and delivering 25 billion messages in 2006. Sybase 365 just deployed a managed service for 4.6 million Virgin Mobile USA customers, providing access to RSS feeds and blogs content.

The $417 million cash acquisition also provides entry for Sybase's overall product portfolio into the telecom world, Chen said.

In a telecom world with big rivalries, Sybase is the Switzerland for messaging, Chen said. "Strategically, we are the last mile, connecting you to the telecoms," Chen said. "Conceptually, we are taking advantage of being Switzerland, supporting all five mobile OSs and 700 operators. We are the glue to make all the environments work together. It is the reason for our survival, why the carriers gave us 4.5 billion of messages a month–competitors wouldn't trust them." About 40 percent of mobile solutions customers are the content providers, he added.

On the competitive front, Chen expects Cisco to make a move at some point along with more pure play competitors with pieces of the puzzle. IBM, Microsoft and VeriSign could also gear up in mobile infrastructure services. RIM could turn out to be more of a partner than competitor. Chen said that RIM supports Sybase's Avantgo product and would open its software stack to allow Sybase's mobile middleware to run on it.

Sybase has a warchest of over $600 million to invest in staying ahead of competitors. Chen noted several areas of focus and potential growth–encryption, biometrics, mobile payments, healthcare industry solutions and embedded capabilities. Sybase will not get into the applications business, Chen said.

With the mobile side of the business expected to surpass database sales over the next five years, I asked Chen if he would sell off the database division. "Wireless mobilty is an extension of the enterprise, where Sybase databases live, and the database business throws off an enormous amount of cash to invest in our dreams," Chen responded. I also asked if Sybase were an acquisition target. Of course, as a public company CEO Chen didn't take the bait, and just said that a buyer would have to come up with $3 billion.