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Interesting Developments at Zend

Wednesday, May 21. 2008

For those of you who haven't been following it, Zend on Monday went through a series of lay-offs which was picked up by the Washington Post. According to the brief article (which was a syndication from TechCrunch) Zend has laid off approximately 25% of their R&D staff in at attempt to become cash-flow positive and potentially line themselves up for an acquisition. I don't have any hard figures as to what that means but I'd estimate that Zend's recovered somewhere between $600-800k in revenues based on an educated guess of the average R&D salary for someone in Isreal (where R&D is based) of $60->$80k USD and the number of people estimated by TechCrunch as being laid off (about 10 people, which sounds right). If I'm anywhere in the ballpark there I think that's a significant recovery for Zend and very well could put them into the black.. Which is why Everyone I've spoken to who is familiar with the subject considers the lay-offs a positive thing (except of course those who lost their jobs -- sorry guys/girls -- I'd love to hire you but I can't open up an R&D shop in Isreal just yet..), but here are some things I've either heard from within the organization or read online which I think are worth commenting on:

  • R&D wasn't the only department to get hit, although it was clearly the primary focus. The IT department, Business Development, Sales, and Global Services were also affected to a much smaller degree

  • Despite speculation from Internet News that the most likely buyer is IBM, but I find that very unlikely. I think it is much more probable that Microsoft is the buyer if one exists

Why do I think I'd put my money behind Microsoft instead of IBM? Well, there are a lot of reasons.. Firstly, despite the impression given by the reporter at Internet News, IBM to me has shown more negativity in general toward Zend then it has positive in recent dates. For instance, Project Zero (cited as a positive reason IBM would buy Zend) in my mind is hardly such. If you haven't seen this before, Project Zero is a platform for dynamic languages implemented entirely in Java (one of which is a PHP implementation). The thing is, the PHP which exists in Project Zero is completely incompatible with all of Zend's product line -- hardly something I would say means IBM is trying to align itself with Zend. In reality, I think Project Zero is really a shot at Microsoft's .NET architecture and an answer to the recent moves from Microsoft to port implementations of popular dynamic languages to run in the .NET DLR and IBM's willing to step on Zend's toes to do so. Secondly, while it is true that QEDWiki is a PHP application and built on top of Zend Framework, in recent months I've heard more and more rumors from contacts inside of IBM that QED is going to be re-implemented entirely in Java long-term.. Again, I just don't see how IBM's recent behavior adds up to an acquisition.

That said, I do think Microsoft has a lot of good reasons to add Zend to their empire. Firstly, Zend has been a huge asset to Microsoft through their Technology Collaboration to make PHP a first-class citizen on the Windows platform and get it certified for Windows Server 2008. This partnership, to me, is huge for Microsoft -- to the point I expressed concern over Microsoft's ultimate intentions -- the same justifications for my paranoia could very well be reason enough for Microsoft to acquire Zend. Secondly, I think a Zend acquisition makes a lot of sense to a company like Microsoft if you believe they well ultimately prevail in purchasing all or part of a company like Yahoo! which is entirely based on PHP technologies (incidentally, I don't think Facebook is out of the picture either as a potential Microsoft acquisition target -- they already have an equity-interest there and the Facebook advertising engine could prove equally useful in the battle with Google). Bottom line to me is both of Microsoft's best options to compete with Google are PHP-based technology shops and Zend has been Microsoft's biggest ally in making these two very different technology platforms operate harmoniously -- that's got to be worth a few bucks. Oh, and did I mention that the rumor on the street is that Zend's co-founders Andi and Zeev have been making recent visits to Seattle? Not that it means anything, but it does make one wonder..

Then again, I could be entirely wrong about the whole thing -- it sure is fun to speculate about it though.


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I agree that Microsoft seems like a very likely candidate for a buy up. However the reasons why you state that IBM is unlikely seem off. Number one, IBM is a beast with many heads. Project Zero is one thing, they could be looking at other stuff at the same time. Also the collective PHP expertise (and community standing) could be very beneficial to IBM's Project Zero team and they could even afford to just kill all of Zend's current business (possibly open sourcing a few things in the process).
#1 Lukas (Homepage) on 2008-05-21 09:38 (Reply)
Just want to mention that 60-80k x 10 would be 600x800k not 6-8m :)
#2 David on 2008-05-21 12:03 (Reply)

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