* More head-scratching acquisitions in management
Last week, I wrote about an acquisition that had set many people to wondering what it was really all about. That deal – Novell’s acquisition of e-Security – has since been followed by two more that have left many having a hard time seeing the synergy. Curiously, both were announced on the same day – April 27.
Taking them in alphabetical order by acquirer, the first is the acquisition of NetIQ by AttachmateWRQ. This one really did puzzle a lot of people who know at least a little about each company, and many more who didn’t.
AttachmateWRQ is itself the product of a merger between two peers – Attachmate and WRQ – in the “legacy integration” space (read: terminal emulation and tools for linking disparate systems together, primarily distributed client environments with servers and mainframes). Though they had complementary strengths, such as Attachmate’s Unisys focus and WRQ’s tools for HP environments, the two were close competitors in the same market – as well as close geographic neighbors, both being based in the Seattle area. When the two were independently acquired by the same group of investors, they were merged about a year ago to form what is reputed to be Washington state’s largest privately-held software company.
So how does this stack up with the acquisition of NetIQ, a systems and security management leader with a strong focus on the distributed Microsoft enterprise – beyond the obvious Washington connection, that is? First of all, AttachmateWRQ needed to broaden its enterprise penetration. Distributed systems that need tools to integrate with centralized environments also require tools to maintain the coherence and availability of the distributed computing base. As most of these systems in any enterprise tend to be Windows machines, this is where the synergy lies.
More significantly to NetIQ, however, is the relief AttachmateWRQ brings to the market challenges that NetIQ has faced in recent months and years. NetIQ was one of the pioneers in managing Microsoft systems throughout the enterprise. At a time when Microsoft’s own offerings in this space were rudimentary at best, this was no insignificant value – but NetIQ did more than capitalize on the opportunity. The ease of use and deployment of its tools were a natural and well-received complement to one of the primary values of Windows, which strongly bolstered NetIQ’s early success.
More recently, however, two factors in particular have posed significant challenges to NetIQ. One is Microsoft’s own recognition of the opportunity, which until recently, allowed to pass it by, in giving up the management of its own systems to more mature solutions. As Microsoft has stepped up to fill this gap – in the last couple of years particularly – NetIQ has felt the pressure, which has been reflected in market performance.
The other is a challenge that has been exacerbated by a burden that not only NetIQ, but every other public company has had to face: Sarbanes-Oxley compliance. While it may be good for investors overall (gee, I’m sure glad we got rid of corporate greed with the stroke of a pen!), Enterprise Management Associates data suggests that the cost of SOX compliance may run as high as 3% or more of top-line revenue generally. For a public company valued at acquisition at roughly $495 million and struggling with performance from the world’s largest software vendor, that burden proved to be excessive. I doubt this is the last such story we’ll see.
With this deal, NetIQ is relieved of this onerous expense – with the side benefit of easing the focus on future performance by getting to keep that performance more private. In combination with AttachmateWRQ’s resources and positive history, these are tools NetIQ can hopefully use to rebuild its core strengths and keep healthy competition alive in its market – no small challenge there!
Some of these same dynamics enter into the Avocent-LANDesk deal. Avocent also leads a market of enterprise connectivity solutions for the distributed enterprise – in Avocent’s case, the “out of band” market that provides alternate paths to connectivity with system and network resources, such as keyboard-video-mouse (KVM) products that enable the data center to operate more simply and efficiently. It, too, sees management as a logical extension of its enterprise integration assets
Here similarities with AttachmateWRQ begin to diverge, however, since Avocent has long been well embedded in data center operations, while AttachmateWRQ’s penetration is throughout the broader enterprise. On the “acquiree” side, LANDesk has been successful in steering clear of many of NetIQ’s challenges, although it too faces many of the same threats. Avocent’s move toward management is also less sudden, considering the steady progress the company has made toward capabilities such as Intelligent Platform Management Interface (IPMI) technology that enables system management and provisioning from hardware up. In both the AttachmateWRQ and Avocent cases, however, management offers a path for maintaining a strong competitive stance against a range of competitive threats in enterprise integration and the virtualization of access.
These two deals also suggest more to come from both entities – which reflect the success of tools that integrate broad environments in pragmatic, accessible ways. AttachmateWRQ and Avocent have succeeded, not because they have based their success on high-glitz theoretical concepts of system integration and connectivity. They have succeeded because they have provided the tools the enterprise needs every day to get a handle on the realities of distributed environments as they really are. This suggests that their view of what is valuable in the future of distributed integration could have an interesting influence on a domain in which many see some of the most promising developments in IT today.
