Printer Friendly

M&A Impact: Sterling Buys Another Rescue Operation.

Since Sterling Software floated off its e-commerce business - Sterling Commerce - four years ago, the enterprise software veteran has been in almost constant acquisition mode. However, the purchases it has made in that time have been somewhat opportunistic and have taken it away from its original intention to build itself a distributed systems management business through acquisition. TI Software, Synon and Cayenne were all fire sale acquisitions in a market exemplified by rock bottom valuations. The depressed nature of the application development tools market, therefore, lent itself to cheap rescue acquisitions. (Sterling paid $165m for Texas Instrument's software business in 1997 when the business had revenues of $250m for 1996; $79m for Synon which had annualized revenues of $69m and $11.4m for Cayenne which had revenues of $11m.) Building a systems management business was always going to be expensive and a more difficult maneuver because the market valuations for companies in this sector are so much higher - CA's and BMC's market capitalization bear this out. But Sterling has finally managed to partly realize its three-year-old systems management ambitions in agreeing to purchase Spectra Logic's high performance back-up software business. Spectra Logic may not be the ideal building brick. The company has always said it wanted to buy a large, established supplier of distributed systems management tools and Spectra Logic is far from large. But it nevertheless goes some way to broadening Sterling SAM'S systems management business beyond its traditional focus on mainframe storage, disk and memory management to the world of distributed systems. And it characterizes earlier acquisitions in that it was cheap. When the deal closes at the start of April it will not be material to Sterling Software's earnings and, therefore will not need to be disclosed. But the price paid is unlikely to make much of a dent in Sterling's huge $700m cash pile. The 170 person storage concern after all was profitable and showed total revenues of $25m for fiscal 98. Sterling plans to buy the software portion which is roughly half of that figure in revenues and 80 people in engineering and support so the general consensus of opinion is that it will not spend more than $30m. Spectra Logic seemed eager to divest itself of the business which clearly placed Sterling in a stronger bargaining position to put forward a cut price offer safe in the knowledge that it would be accepted. "It was a very rapid decision. There was a lot of market consolidation happening in the software side of the storage industry. We found that large companies didn't want to use back-up and retrieval products from a little company like us, so we knew we had to get out of this market and focus on storage hardware," says Mike Sausa, president at Spectra Logic. Sterling's primary interest in Spectra Logic is Alexandria, a reporting, monitoring and automated back-up tool for Unix file systems and Oracle, Informix, SAP and Sybase databases that shares its name with the renowned library in Ancient Egypt. Alexandria is a high-end tool in the same vein as equivalents from Veritas and Legato which Sterling plans to integrate with Vantage Network Edition, its homegrown back-up product for Unix, Netware, NT and OS/2 in a bid to provide high-speed, high performance back-up for non-mainframe environments. Sterling already has an ADSM back-up tool for mainframe environments and this offering will go some way to offering the equivalent functionality for the distributed systems world. Sterling claims that Alexandria's superiority over rivals' equivalents comes from its small footprint. "Storage management software from Legato or Veritas require a company to purchase several additional large servers where Alexandria can be run on a workstation," says Nadara Craun, a spokesperson at Sterling. Short term, Sterling can capitalize on the global sales channel it has built to take Alexandria into new accounts as well as sell it into its existing installed base. Spectra Logic had hit a glass ceiling and did not have the global direct sales team required to penetrate the Fortune 500 market place. This market is Sterling's home ground and the one it has played in longest. There should be no reason why Sterling cannot leverage its global enterprise presence to achieve reasonable revenues in a bid to achieve its stated ambition of balancing the revenues streams from its three main businesses in application development, systems management and federal systems. Currently, Sterling's revenues are heavily skewed towards application development - not surprising given that it has absorbed TI Software, Cayenne and Synon's revenues onto its P&L in the last 18 months. For fiscal 1998 application development tools accounted for 50% of revenues ($366m), while the systems management contributed 30% to the total ($204.5m) with federal systems making up the bulk of the shortfall at 20% or $148.8m. IDC estimates that the systems management market is growing at a respectable 20% per annum and Sterling believes that with the Spectra Logic acquisition it is now in a better place to compete with Veritas and Legato in the distributed systems management field.
COPYRIGHT 1999 Datamonitor
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1999 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:Company Business and Marketing
Publication:Computergram International
Geographic Code:1USA
Date:Mar 22, 1999
Words:839
Previous Article:M&A Impact: JD Edwards Gets a Taste for M&A With Premisys.
Next Article:M&A Impact: Sage Plans to Suck in Tetra.
Topics:


Related Articles
Purchase of unsold co-op shares shifting emphasis.
CCL rescues former Avery-MBO converter.
Think through live gifts; Chocolate bunnies, stuffed chicks better choices.
47 articles approved on town meeting docket.
Divers train for ice rescues; 19 certified at Whalom Lake.
Public forum on bottling water; Hearing to air concerns about selling reservoir's reserves.
Zoning prohibits sale of water; Sterling counsel delivers opinion.
Falcon Aviation Services (FAS) signs for the first EC135.
UAE Mortgage Market Becoming Increasingly Complex.

Terms of use | Privacy policy | Copyright © 2020 Farlex, Inc. | Feedback | For webmasters