Exchange Applications Gobbles Up GBI for $24 Million

In a move designed to enhance its e-commerce clout, Exchange Applications, Inc., bought closely held software provider GBI today for $24 million (US$) in stock.

Through the acquisition, Exchange Applications has added personalized e-commerce software to its arsenal. This software allows an e-commerce site to use e-mail for customer service and marketing. In addition, the Boston, Massachusetts-based company picked up GBI’s software hosting capabilities and its potential to also become an Application Service Provider.

This relatively new business is based on leasing expensive software packages via the Internet to companies for a monthly fee. “This capability is a key component of our Exchange Applications’ growth strategy, and strengthens our ability to provide the industry’s most powerful and intelligent customer relationship and optimization solutions,” said Andrew Frawley, Exchange Applications’ chief executive.

Founder Becomes COO

Under the deal, Seattle, Washington-based GBI becomes the wholly owned subsidiary of Exchange Applications. All of its 28 employees and contractors are expected to stay with the company. Founder Gino Borland will become chief operating officer of the new division, which will continue to sell its software through its direct sales force.

Analysts seem to feel that real-time e-commerce software is a hot and necessary tool in the burgeoning online arena. They added that GBI’s foray into this niche would make Exchange Applications more competitive.

“In the online world, your competition is just a click away,” said Borland. “Message relevance is the key to forming lasting relationships with customers.”

Made The Grade

Exchange Applications said it decided to purchase GBI because its software could generate 5.5 million unique e-messages per day from a single client’s site. The software also communicates in 18 different languages, including Japanese, Korean and Chinese — which require double-byte character support. Currently both Microsoft.com and Expedia.com are using the software to manage tens of millions of customer inquires, officials say.

About Exchange Applications

Exchange Applications (Nasdaq: EXAP) markets Valex, which helps companies analyze information in their databases, create targeted marketing campaigns and track their effectiveness. Through consulting, integration and training services, Exchange Applications strives to be a one-stop shop for its e-commerce clients.

The company has marketing agreements with IBM and NCR. Its customers include Bell Atlantic, FDX and US West. Insight Venture Associates and its affiliates own 36 percent of the Exchange Applications.

Since it went public in December at $11 a share, its stock has tripled. The shares fell $2.75 per share yesterday to $33 per share.

In 1998, Exchange Applications, which employs about 157 workers, lost $1 million on revenue of $24.8 million.

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