BMC to buy BladeLogic for $800 million

by Chris Kanaracus

March 17, 2008 —

BMC Software said Monday
that it intends to purchase BladeLogic,
a maker of data center automation software, for US$28 per share in cash, or
about $800 million.

The company characterized BladeLogic as "the fastest growing company in
the fastest growing segment of IT management software" in a statement.

BladeLogic's board of directors has unanimously recommended that the company's
stockholders accept BMC's offer, which will occur within the next 10 days, according
to a statement.

BMC said the pending purchase will fit into its "business service management"
portfolio. The two companies have already worked together to integrate their
products, according to BMC.

This would be the latest in a string of recent acquisitions by BMC, which include
ProActiveNet, maker
of an IT "early warning system," and RealOps,
a company specializing in runbook automation software.

Bob Beauchamp, BMC's CEO, said during a conference call that the redundancy
between the companies' portfolios is "minimal," which "stands
in stark contrast to the overlap seen in acquisitions by many of our competitors."

"We will offer day-one, customer-proven product integration," he
added.

Dev Ittycheria, CEO of BladeLogic, also described the company's products as
complementary, and declared the pending deal will make BMC the "obvious
choice for an IT executive when it comes to managing the data center."

Last week, Citigroup named BladeLogic, among other tech firms, as being ripe
for acquisition. Beauchamp indicated that BMC had designs on the company for
a while. "We have coveted this business for a long time," he said.
"All our evaluations of this technology ... showed BladeLogic was the best
product of its type, period. Convincing them to sell this was not an easy process."

Ittycheria said BladeLogic had been "very highly focused on executing
[its] stand-alone strategy when approached by BMC."

The entreaty prompted BladeLogic to reach out to a "group of alternative
potential buyers who had expressed interest in the past ... ultimately BMC proposed
the most compelling transaction," he added.

Stephen Elliot, an analyst with IDC, said via e-mail that the pending deal
makes sense for BMC, but argued that the integration work would be broad.

BladeLogic has developed a "solid product portfolio through roles-based
controls, granular change and configuration visibility, and application release
management," he said, but "BMC must now work hard to integrate a group
of products across the client, [runbook automation], server, and application
stack."

In a separate interview Monday, Elliot said BMC is set to scoop up the last
big standalone prize in data center automation: "This [is] the large market
shareholder in this space. There are no other options."

"The other interesting thing with BMC is they're as much about mainframes
as they are about distributed [environments]," Elliot added. "Might
they want to port some of the BladeLogic capability into the mainframe side
of it?"

Another observer, analyst Evelyn Hubbert of Forrester Research, said by e-mail
that BMC is making "a great move."

While BMC has already been playing in the data center automation space to some
degree, "BladeLogic is the key partner to get a stronger position, as BladeLogic
has an excellent server provisioning solution," Hubbert added. "They
will have to do some 'cleaning' of the overall solution, but BMC is good at
that and good at integrations."

Hubbert noted that one BMC rival, Hewlett-Packard, gained "a bit of a
head start" by purchasing Opsware, another data center automation vendor,
for about $1.6 billion last year.

"BMC and HP are competitors and they are certainly eager to win against
each other. This puts them at par at the data center," Hubbert asserted.
HP's only advantage against BMC now is its hardware products, which give it
an "entry into the decision-makers buying [hardware]," she added.

HP, meanwhile, announced a set of data center optimization-related products
and services of its own on Monday.

IDG News Service