19 June 2002 Network management software vendor Micromuse is to acquire troubled rival RiverSoft in a £43 million (€67.1m) cash deal.
Micromuse CEO Greg Brown said that the company was buying RiverSoft primarily for its Network Management Operating System (NMOS) network intelligence engine, which provides object modelling and root-cause analysis. NMOS would complement Micromuse’s flagship Netcool diagnosis and correlation tool, said Brown.
“Customers are increasingly demanding intelligent software that helps managers isolate and resolve the root causes underlying service-affecting problems,” said Brown.
The £43 million (€67.1m) price tag represents a 58% premium on yesterday’s closing price and may seem steep for RiverSoft, which has seen revenues fall sharply during the last fifteen months. However, in the period to the end of March 2002, RiverSoft could boast cash-in-hand of some £48 million (€74.9m).
Micromuse said that shareholders representing 58% of RiverSoft’s stock have already agreed to the deal.
RiverSoft floated on the London Stock Exchange in December 2000, but quickly fell out of favour with investors when sales and profits failed to meet highly inflated expectations.
In the year to the end of December 2001, the company reported a net loss of £39.4 million (€61.5m) on revenues of just £6.5 million (€10.1m), up from a fiscal 2000 net loss of £26.5 million (€41.3m). At such a burn-rate, the company would have barely survive until the end of 2002.
New RiverSoft management, appointed in November 2001, slashed costs in a bid to cut losses, but revenues fell further in the first quarter to the end of March 2002 to just £500,000 (€780,000), which made takeover – or a lingering death – virtually inevitable for RiverSoft.
In contrast, Micromuse, which was a Sun hardware reseller until the mid-1990s before it developed its core Netcool network management suite, achieved revenues of $39 million (€40.8m) in the first quarter of 2002. This was down from the $59.3 million (€62.1m) posted in the same quarter a year earlier, but the company still managed to eke out a slim profit of $419,000 (€440,000).