Cash acquisitions back in favour

9 February 2006

A round-up of the key deals in the global information industry in July 2002.

With share prices stuck in the doldrums, cash acquisitions are firmly back in favour - at least for those that have the cash. No more so than at security software specialist Symantec.

The Cupertino, California-based company put its bulging bank balance to good use in July with the purchase of just about every available threat management software and services company. Leveraging its $1.53 billion cash mountain, the company spent

Scient finds a final resting place

Once high-flying IT services company Scient has been bought by low-profile professional services group SBI and Company. The Utah-based firm acquired Scient's assets and is shepherding it through Chapter 11 bankruptcy protection with the aim of eventually subsuming the failed consultancy. Scient's stock price soared to $130 in March 2000 on the back of an avalanche of ecommerce and web site design project wins, mostly in the US and UK; it was trading at $0.30 when the SBI buy-out was announced.

SBI has also bought all the shares of US consulting firm Lante Corp, a specialist in application integration services. The company says its long-term strategy is to "build a business composed of world-class professionals". But with Scient's and Lante's fates having been clear for the past year, many of their best consultants are long gone.

an ostentatious $375 to buy four young security software outfits: Mountain Wave (price $20 million), whose CyberWolf automates the detection of security incidents through real-time analysis of systems; SecurityFocus ($75 million), which maintains a database of bugs and vulnerabilities in software and runs the BugTraq problem alert mailing list; RipTech ($145 million), which provides security consulting and network monitoring services; and Recourse ($135 million), which makes ManTrap, a system for ensnaring hackers in false scenarios to observe their behaviour, and ManHunt, an intrusion detection system that Symantec intends to combine with its own Intruder Alert.

Those are all designed to galvanise Symantec's enterprise software business, which grew an impressive 35% in the company's latest quarter to 30 June. At the same time, the company's consumer security software business, an area Symantec said it would de-emphasise a few years ago, surged 90%.

As a result, the company was able to turn a loss of $21.2 million in the year-ago quarter into a net profit of $56.6 million.

Aside from that kind of cash generation, the funds for the acquisitions came from a $525 million private offering the company made in October 2001. Analysts regarded the acquisition spree as clever and timely, with Hurwitz Group director of security strategies Peter Lindstrom arguing that they strengthen places where the company was traditionally weak. "This positions them clearly to own the entire threat management space," he observes.

Meanwhile, business intelligence software (BI) company Business Objects has also been reaching into its pockets to acquire Acta Technology, a developer of data extraction, transformation and loading (ETL) tools, paying $65 million in cash. At the end of June, after a 10% rise in quarterly revenues and a slight rise in profits to $11.9 million, the company boasted $333 million cash in hand.

Business Objects CEO Bernard Liautaud says the deal will enable the company to circumvent the need for customers of its analysis tools and analytic applications to find third-party ETL technology to build their databases. It will provide "complete BI solutions that integrate data across the scores of packaged and custom-developed applications that they use today," he added.

With 230 customers, Acta had revenues of about $25 million in 2001. BI front-end tools companies have come under pressure from vendors with wider portfolios, such as Information Builders and SAS, which offer ETL software alongside their data query, analysis and reporting products. Again, the deal pleased analysts, with Gartner and AMR Research both agreeing that the move would create benefits for both customers and suppliers and is part of a general trend of consolidation in the BI market.

Acquirer	Activity	HQ	Target	Activity	HQ	Price
Key IT industry acquisitions in July
Business Objects	Business intelligence s/w	France	Acta Technology	Data integration s/w	US	$65m
First Data	Data processing svcs	US	PayPoint Electronic Pay Sys	Electronic processing unit of BP	UK	n/a
Jippii	Internet &telecoms svcs	Finland	KPNQwest	Data services	Holland	EU2.5m
Perot Systems	IT services	US	ADI Technology	Government IT consulting	US	$32m
SBI &Co	IT/BPO consulting svcs	US	Scient	IT consulting svcs	US	n/a
SBI &Co	IT/BPO consulting svcs	US	Lante	IT consulting svcs	US	n/a
Symantec	Security s/w	US	SecurityFocus	Security threat mgmt systems	US	$75m
Symantec	Security s/w	US	Recourse Technologies	Network intrusion detection	US	$135m
Symantec	Security s/w	US	Riptech	Managed security svcs	US	$145m
Symantec	Security s/w	US	Mountain Wave	Incident detection s/w	US	$20m
Ubizen	Managed security svcs	Belgium	GlobalSign	Secure messaging svcs	Belgium	n/a

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