SunGard Business Split Not Likely to Cause Disruption

SunGard will spin off its disaster recovery business from the main integrated software and processing solutions company that primarily serves the financial services industry. The split will result in two independent companies and is expected to closed by the end of the first quarter of 2005, the Wayne, Penn.-based company announced this week.

The main reason for the split is for the market to value each company appropriately and so that investors can make separate investment decisions about each company, SunGard executives said in a statement. Most customers aren't likely to see much effect, though, since the groups have operated in a fairly autonomous fashion.

SunGard Availability Services, which will retain the SunGard name, provides managed hosting, storage, information security, records management, disaster recovery, contingency planning software and consulting. With $1.2 billion in revenue for 2003, and operating income of $340 million (excluding certain expenses and merger costs), the company employs more than 2,000 people and has facilities in 60 locations serving 10,000 customers.

When the transaction is completed, James Simmons, group chief executive officer of SunGard Availability Services, will become president and chief executive officer of the spun-off company. Michael Ruane, currently chief financial officer of SunGard, will become chief financial officer of the spun-off company.

Replacing Ruane will be Andrew Bronstein, currently vice president and controller of SunGard. No workforce reductions are expected in either company. Of the total 13,000 SunGard employees, only about 100 have job functions that span the two businesses, and they will be offered positions at one of the two independent companies.

After the planned spin-off, the integrated software and processing solutions business of SunGard will be more agile and better able to support its customers in their industries, the company contends. The integrated software and services company has more than 10,000 employees and serves more than 15,000 customers in more than 50 countries, including the world's 50 largest financial services companies. In 2003, it had revenue of $1.8 billion and operating income of $324 million (excluding corporate expenses and merger costs).