isham research
Update - 4 August 2005: This analysis concentrated on business probity and did not discuss the technical merits of the product. There is a chance that the product (technically the "Virtual Mainframe" though commonly just referred to as "UMX") may survive the bankruptcy since the assets have now been bought by a company with a solid business reputation.
Update - 18 May 2004: The view in May 2002 seems to have been accurate - as long predicted - UMX Technologies filed for bankruptcy.
During a review of the low-end mainframe market for 2003 a more rigorous look was taken at UMX Technologies.
This is a remarkable company. Started in 1998, it has already absorbed around $3.8 million in venture capital:
Established in 1998 from technology dating back to the late 1980s, UMX Technologies generated €100,000 in revenues in 2000 and should reach revenues of more than €1 million in 2001 from sales to clients including Cap Gemini, Goodyear, and the city of Dresden. Mr. Markus said he expects the most recent round to see the company through to profitability.
The company expects that this will be its last round of financing before it breaks even in mid 2002. A likely exit for UMX is a trade sale to one of the companies active in, or aiming at providing state of the art S/390 solutions.See Note [1]
Company development to date has been funded by € 0.5M in seed financing from Twinning and other business angels; € 2.7M by Wellington Partners, Twinning, IV-One and Kerswerf in 2001; and a second round of € 2.8M in 2003.
Some of the deltas seem to be caused by restatement of the € values of the first two rounds to express their then dollar values in Euros - an odd and somewhat misleading practice.
But what happened to the January 2002 €1.5 million "second round" in the above list? All evidence of it has been deleted from both the UMX and Wellington web sites. It can hardly have been a mistake; they announced it twice - once on 15 January 2002 and once on 31 January 2002 - but now the May 2003 financing round is described as the "second".
UMX's Virtual Mainframe Facility originally had a stiff price tag - higher than that of Fundamental Software's FLEX-ES. Now that reported prices are much lower, it will need to sell a vast number of copies. Success always seems to be just around the corner. In 1999 UMX expected revenues of $4.5 million by 2001 from Japan alone - over 150 copies a year. In fact it appears there have been no sales at all in Japan so far.
The mid-2002 break-even target was even tougher - if the $2 million received in June 2001 had in fact been consumed by the time the January 2002 $1.5 million injection was received, then the organisation was burning roughly $4 million a year - roughly consistent with the then claimed 25 employees. At a price of $30,000 per Entry Server licence, over a hundred licenses a year need to be sold to cover the cost run rate - before profit and taxes. Realistically, 300 sales a year are required to ensure viability.
Those familiar with systems marketing will know that success doesn't come overnight - especially with a new concept. The original PCMs (Amdahl and Itel) sold only a handful of systems between them in their first year. To plan on selling dozens is unrealistic - to plan on selling hundreds is fantasy.
One significant section of the market is in any case closed to UMX: Partnerworld for Development, where Fundamental Software's partners such as T3 Technologies and Cornerstone Systems have products using Fundamental's FLEX-ES package.
UMX's reference list - most of which were named in press releases up to a year ago - lists five users. Five sales of Entry Servers in two years - only two in the last year - is inadequate for a 25-employee company - even a Deloitte and Touche 'Rising Star' - by over an order of magnitude.
However, UMX is indeed an IBM Business Partner.
This press release disappeared from the UMX site in January 2003 (the hyperlink now points to a version stored in the independent Internet Archive) as did an earlier version. Curiously, the corresponding Wellington Partners press release disappeared from their site at the same time. A version of the same text survived for some time on the Wellington site in German but has now disappeared - is this an attempt to eliminate information on this financing round?