BMC to buy BladeLogic for $800 million

BMC set to acquire data center automation vendor BladeLogic, beef up its business server management product line

BMC signs definitive agreement to acquire data center automation vendor BladeLogic in an $800 million deal set to close in between 45 and 90 days.

BMC Monday  announced plans to acquire the sought-after data center automation vendor BladeLogic in an $800 million deal that would boost BMC's business service management and automation products.

The deal would equip BMC with "coveted" data center automation from BladeLogic, which has more than 70 customers and is expected to deliver $90 million in revenue for fiscal 2008, IDC reports.

"We coveted this business for a long time," said Bob Beauchamp, BMC's president and CEO, on a press conference call. "Convincing them to sell was not an easy process, and we were not the only company interested in buying them."

Industry watchers speculated since HP acquired Opsware for $1.6 billion last year that BladeLogic's asking price grew exponentially and leading management vendors such as BMC, CA and IBM, as well as contenders in the data center management market such as EMC, were looking to buy the hot technology.

"[BladeLogic] is a really interesting company with unique technology and rapid sales growth trading at an attractive multiple in a consolidating industry," said Jeff Gaggin, enterprise software analyst at Avian Securities LLC, in a recent research note. "This is a really hot space and we would not be surprised to see BLOG get acquired by someone like VMware (VMW) or EMC although we are not aware of anything specific; it just makes sense."

For BladeLogic, the prospect of an acquisition was not immediately top of mind, considering the success the vendor (which filed for an IPO last spring) had been experiencing on its own.

"We were focused on our stand-alone strategy when approached by BMC. Several other parties expressed interest in the company. BMC proposed the most compelling transaction," said Dev Ittycheria, BladeLogic's president and CEO, on a press conference call.

BladeLogic started its business in 2001 as an automated server provisioning software company, focused on distributing blade configurations on a one-to-many basis. The company grew its technology to also update, patch and configure virtual and physical machines, using automation to increase the number of servers systems administrators could manage and reduce headcount costs. The discovery and configuration features of its technology also put BladeLogic in a position to help enterprise customers with compliance, security and governance projects. (Compare server management and configuration management products.)

BMC said it will use technology in products such as BladeLogic's Operations Manager to gives its "entire BSM product line a lift across the board" and specifically use BladeLogic technology to ramp up BMC's Service Automation Portfolio. BladeLogic data center automation technology is already integrated with the RealOps run-book automation software BMC acquired last year, and this acquisition will enable the BSM vendor to offer customers enhanced automation features with little integration work.

"There will be no odd behavior. We expect this to be a seamless and elegant integration," Beauchamp said. "There will be no internal arguments or debates that we know our competitors are still wrestling with mightily. We will combine our service automation line with BladeLogic being a centerpiece of that strategy."

Stephen Elliot, a research manager covering enterprise system management at IDC, says the BladeLogic acquisition -- BMC's fourth buy in the past year -- fills a gap for BMC, but the company still has work to do before customers see benefits.

"This deal fills a significant technology need in BMC's Service Automation Portfolio; now further integrations across the BMC portfolio must be developed to drive automated processes," Elliot says. "Strategically, BMC has acquired a set of products that can serve as a catalyst for larger system integration deals across compliance, data center automation and application life-cycle management."

Data center automation technologies are a key target for the big four management vendors, as well as other vendors hoping to cash in on customers' plans to overhaul data centers, industry watchers say. (HP just announced news related to its Opsware technology, for example.)

"These environments are much more complex and more integrated. Blades and virtualization are slamming things together to create integrated resources pools that require vendors to become more comprehensive and more multi-functional because that is the customer's reality," Jonathan Eunice, principal IT adviser at research firm Illuminata, has said. "There will never be one data center vendor that does it all, but the surviving players will be those committed to taking on the immense diversity that will be the reality."

According to BMC, the BladeLogic acquisition will be conducted by means of a tender offer for all of the outstanding shares of common stock, followed by a second-step merger. The board of directors of BladeLogic has unanimously recommended that the stockholders of BladeLogic accept the offer. The offer, which is expected to commence within the next 10 days, will be subject to customary conditions, including regulatory approvals. The deal is expected to close in the next 45 to 90 days.

Copyright © 2008 IDG Communications, Inc.

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