In a separate announcement, Pivotal warned that its earnings will be lower than previously projected. However, the MarketFirst acquisition was a cash-neutral proposition. Pivotal exchanged 2.5 percent of its stock, or 750,000 shares, for the privately held company.

"The cash value Pivotal gave up was well under US$1 million, which is getting close to the average price for a home in the Boston area," Forrester analyst Eric Schmitt told CRMDaily. Another way to look at it is that Pivotal paid less than $10,000 apiece for MarketFirst's 80-plus customers, he said -- "a downright bargain."

MarketFirst's asking price had dropped significantly since Pivotal first explored the possibility of acquisition earlier this year. In its heyday, MarketFirst was an early leader in the online marketing software category, Schmitt said, "but has since struggled with sales difficulty and the loss of several executives."

Competitive Issue

For Pivotal, the lack of marketing automation had become a competitive factor, even though that functionality typically is a distant third to sales automation and customer service automation in the small and mid-size marketplace, Gartner analyst Joe Outlaw told CRMDaily.

"But Pivotal's target customers are high-end or sophisticated mid-sized and low-end large enterprises who have generally the same priorities for the CRM functions," he explained, "but greater requirements for marketing automation than, say, smaller and less-sophisticated businesses."

Good Enough Market?

Outlaw pointed out that Pivotal has strengthened its customer service with its latest release, "and apparently felt the market was good enough to buy somebody to jump-start the marketing piece."

Prior to this acquisition, Pivotal had been tapping E.piphany for its marketing analytics. The MarketShare purchase will not necessarily sever that relationship, as Pivotal will continue to use E.piphany for marketing analytics.

Pivotal will continue to market and sell MarketFirst as a best-of-breed application as well as an integrated part of Pivotal's suite. Plans call for a quick integration and two major upgrades at the four-month and eight-month marks.

The acquisition also will have some impact on the marketing automation market, Schmitt noted. Recent changes in the space include DoubleClick's purchase of Protagona and Revenio's closure. "There are now only a handful of major marketing vendors left, namely Aprimo, MarketSoft, Unica and Xchange."

Pre-Earnings Announcement

Pivotal's announcement of its acquisition of MarketFirst was quickly followed by sobering news of its projected earnings. The company said it expects revenues for the quarter will be in the range of $12 million to $13 million, with $3 million to $4 million in license revenue. In the previous quarter, Pivotal's total revenues rose to $19.1 million from $17.7 million.

"It's a disappointment," Manning acknowledged. "This was a tough quarter, primarily due to what turned out to be a slow summer that reduced the sales cycle to a four-week selling season. We didn't run out of deals -– we just ran out of time to get them across the goal line."