Analysts See Price Rise with BMC's Boole Buy

Analysts praised the likely technical fruits of BMC Software Inc.'s plan to buy California toolmaker Boole & Babbage Inc. but said that customers would probably pay more when the companies' products are integrated.

Systems management vendor BMC Software will issue .675 shares of common stock for each share of Boole & Babbage common stock in a deal worth approximately US$900 million [M], BMC officials said today.

"BMC doesn't have the same reputation for discounting that Boole does," said Herb VanHook, an analyst with the Meta Group Inc. "Our expectation is that Boole customers will end up paying more in the long run."

However, the likely price increase will yield products which have capitalized on BMC's flare for application management and Boole & Babbage's strengths in consolidation and scaleability, analysts said.

"Users may not like paying more (but) they're going to get more," said Ray Paquet, research director with the Gartner Group Inc.

The product integration will revolve around four areas: distributed enterprise management through a single console, OS/390 management, MQ Series and storage management, according to Wayne Morris, vice president of corporate marketing at BMC Software.

For example, BMC Software's Patrol and Best/1 management suites will be integrated into Boole & Babbage's Command/Post software, Morris said. The integration will let customers have a single view for multiple elements in their systems, such as the network itself, routers, satellite links, applications and databases, he said.

"We can bring all of those components together," Morris said.

The acquisition is expected to close in 60 to 90 days, and BMC Software will issue a full statement about its plans for product integration 30 days after that, Morris said.

BMC Software was particularly interested in Boole & Babbage for its strong European presence, and because the companies have remarkably little product overlap, according to Morris, and analysts agreed with the reasoning on both points.

"Boole has a very healthy presence in Europe and that will help BMC," Gartner's Paquet said.

Acquiring Boole will also give BMC immediate access to some markets which would have required much time and energy for BMC to enter, according to VanHook.

"One of the main reasons BMC bought these guys is to gain access to Boole's channel, including countries which are hard to get into," such as France, VanHook said.

Paquet placed the companies' product overlap at between 10 percent and 15 percent, which he said should minimize the number of products that BMC decides to discontinue. However, some customers will find they are using products which will be discontinued eventually, including those who use Boole & Babbage's agent technology, which directly competes with BMC Software's Patrol Knowledge modules, he said.

"Longer term, I don't think Boole's agent technology has much of a future," Paquet said.

The acquisition has received approval from Boole & Babbage's board, but regulatory and shareholder approval is still pending, BMC's Morris said. Boole & Babbage's San Jose, California headquarters will not be shut down, but the company will cease to exist as a separate entity, he said.

The Boole & Babbage deal is the second major acquisition for BMC this year. In February, Texas-based BMC announced plans to buy enterprise analysis toolmaker BGS Systems Inc. for $285 million [M]. The acquisitions help position BMC to deliver on the Application Service Assurance (ASA) initiative it announced in June, which is a product strategy designed to ensure the availability, recovery, and performance of its business-critical applications.

"When you look at our ASA vision, we've got the core pieces together now," Morris said. "There's no clear product capability gap that we now see (and) we're going to focus on execution now."

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