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ATLANTA-Sterling Software's $143 million acquisition of KnowledgeWare earlier this month sets the company on the road to profitability.

From a marketing standpoint, observers say the merger makes sense. There is little overlap in products or services between KnowledgeWare, which markets application development tools for designers of client/server business software, and Dallas-based Sterling, a software company that manages data processing center operations and transfers documents between computer networks.

KnowledgeWare's CEO, football great Fran Tarkenton, will sit on Sterling's board of directors. Although in the past he appeared in advertising for the company, there are no plans to use him again in the future.

Sterling declined to discuss further plans for KnowledgeWare.

"KnowledgeWare will be doing business as Sterling Software," said Deneese Van Dyne, director of communications. "A joint transition team is in place that will define the new company. We expect to know more by Nov. 1," she added.

"We see a tremendous opportunity for Sterling and predict excellent growth," Ms. Van Dyne said.

KnowledgeWare's agency may also be affected by the change. "We really don't know anything except that as of Nov. 1 the name KnowledgeWare will disappear. We don't know what any of this means for us," said Clisby Clarke, exec VP-general manager of McCann-Erickson, Atlanta, KnowledgeWare's agency.

"One question that should be asked is whether there should be a transitional effort in terms of changing the company's brand name over to Sterling," Mr. Clarke said. "...The KnowledgeWare people may feel it is in their best interest to do that; the Sterling folks may or may not agree."

Mr. Clarke declined comment on KnowledgeWare's billings.

KnowledgeWare has been in the financial doldrums for a couple of years. Sales slowed as the personal computer market grew at the expense of mainframes, software for which had been the company's bread and butter.

The company reported a revenue loss of $25.8 million in 1993, and a loss for fourth-quarter 1994 is expected to be announced this week.

Sterling, however, has been on the road to fiscal recovery. The company lost $37.6 million in revenues in 1993 but reported third-quarter 1994 earnings of $15.1 million.

KnowledgeWare will stay in Atlanta as a Sterling division. The merged company will be the 11th-largest software marketer in the world.

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