Computer Associates International's plans to acquire the Dallas-based Sterling Software for $4 billion are aimed at helping the software giant strengthen its electronic-business product lineup, analysts said.
The companies announced the acquisition plans yesterday morning, in what CA said would be the largest such deal in the history of the software industry. It has been OK'd by both companies' boards of directors but still awaits regulatory approval.
With CA's press in the electronic-business market, Sterling's portal product, Eureka:Suite, which has attracted such enterprise users as 3M, is a complementary fit, said Ron Exler, an analyst at Robert Frances Group.
"Our view is that any vertical business should be looking at participating in an online community," Exler said. Such portal expertise is undoubtedly one of the plums that attracted CA to Sterling, he said.
Another attraction was Sterling's financial position, Exler suggested. Sterling posted revenue of $207 million for the last quarter of 1999. Although $4 billion "is a lot of money," said Exler, acquiring a company "for four or five times revenue isn't bad," he added.
Like CA, Sterling builds by buying, Exler said. Less than three weeks ago, it bought storage-area network software company Retrieve.
Although CA officials contend that there is virtually no overlap in products between the two companies, "there's always overlap," Exler said, even if it's not immediately obvious. "Every software company has a dog or two," he said.
Just as it did when it bought Platinum Technology last June, CA will scrutinise Sterling Software's product lineup for an overlap, predicted Exler. "If they find one's a dog and one's a star, they'll kill the dog and keep the star, no matter which company's product it is."
CA stated on its Web site that it promises to issue road maps on the products in coming weeks.