5 July 2002 Troubled asset management software vendor Peregrine Systems “looks increasingly ready for acquisition” – and systems giant IBM is the most likely candidate to buy it, according to analysts at Giga Information Group.
Peregrine’s current parlous condition is the result of the eclectic acquisition binge of the company’s former CEO Steve Gardner between spring 2000 and mid-2001. This spending spree included electronic data interchange (EDI) vendor Harbinger in 2000, middleware vendor Extricity in March 2001 and help desk software vendor Remedy in June 2001.
Analysts lambasted Gardner’s strategy – particularly the acquisition of Harbinger – as incongruous and erratic. In addition, the company has restated its earning over questionable accounting practices, its revenues have stagnated and nearly half of its workforce have lost their jobs.
Analyst Robert McNeill at Giga says that there are several reasons why IBM should purchase Peregrine. First, Peregrine’s Service Center software for managing IT assets is the “product of choice” for Tivoli, IBM’s systems management unit.
In fact, Tivoli sold the Tivoli Service Desk Products line to Peregrine in 2001. By buying it back, Peregrine “would plug a hole in the Tivoli offering, as the market moves away from best-of-breed implementations to more integrated product suites,” says McNeill.
The cost of purchasing Peregrine is likely to be cheap. This is due to the ferocious cost cutting plan instituted by the company’s new management. Furthermore, Peregrine’s stock price is, understandably, at rock bottom, having traded at well below $1 for much of the year, down from a 52-week high of $31 before the crisis broke.
McNeill adds that Peregrine will help IBM compete with rival Hewlett-Packard. HP is now heavily targeting the outsourcing market, centred on its popular systems management suite HP OpenView.
Also, IBM’s services division, Global Services, is enjoying a good deal of success selling Peregrine’s infrastructure resource management (IRM) product. IRM provides tools for managing desktop, network and integration projects. Giga is tipping the use IRM to grow substantially as the downturn in IT spending causes large organisations to amalgamate budgets for system operations and network operations.
However, McNeill cautions that an acquisition will not take place before accountant PricewaterhouseCoopers gives Peregrine’s accounting practices “a clean bill of health”.