Computer Associates International's $4 billion bid to acquire Sterling Software, announced on Monday, should benefit users of both companies' data centre and electronic-business software by providing a complementary product fit.
Although Sterling and CA both tout storage, network management, application development and electronic-business tools, analysts reinforced claims made by CA executives that there's little, if any, product overlap.
Users of software from both companies stand to benefit from the merger, said Rich Ptak, an analyst at Hurwitz Group Inc. in Framingham, Mass.
"I just don't see any red flags for users on this," he said. "CA has a more complete product set (to offer Sterling users), while Sterling fills in some holes for CA."
For example, Sterling offers customers more disk storage management software for IBM's OS/390 environment, while CA's strengths are in tape storage management systems, said CA President and COO Sanjay Kumar.
Look for the CA development juggernaut to quickly integrate tools. "We have hurdles to clear," said Kumar. "But we want to get to CA World (CA's annual user conference in mid-April) with the integration done and the (applications) rockin' and rollin'."
High on CA's task list are the following:
CA would like to integrate Sterling's portal product, Eureka:Suite, with its Neugents neural network product and Jasmine ii, its application development software.
Last September, Sterling bought Information Advantage Inc. and its Eureka business intelligence software for $168 million. The Web-based tools have attracted enterprise users such as 3M.
Calling the CA/Sterling product fit "complementary," Ron Exler, an analyst at Robert Frances Group, said that "any vertical business should be looking at participating in an online community." Such portal expertise is undoubtedly one of the plums that attracted CA to Sterling, he said.
In enterprise application integration, look for Cool:Jasmine and Cool:Neugents to join Sterling's Cool:Joe application development tool lineup.
In the future, "network and storage management will become unified," Kumar said. For example, Sterling's storage management tools, which got a boost with its purchase in January of storage-area network software company Retrieve Inc., will be combined with CA's eTrust security suite. Once that's completed, those systems will be plugged into CA's Unicenter systems management framework.
CA also plans to expand Sterling's federal government services business, said Kumar. Sterling has contracts in air-traffic control systems development, weather tracking and prediction, and numerous Department of Defense projects - all areas where CA's combination of 3-D visualization and Neugent software would be a good fit, Kumar said.
Sterling's revenue in general is attractive, Exler said. The company posted revenue of $207 million for the last quarter of 1999 and $807 million for fiscal 1999. Although $4 billion "is a lot of money," buying a company for four or five times its revenue "isn't bad," he said.
CA's revenue for the last quarter of 1999 was $1.8 billion. A little arithmetic supports a staggering minimum estimate of $8 billion in annual revenue.