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CA to acquire Concord Communications

With its $330 million acquisition of Concord Communications, experts say Computer Associates reestablishes itself as a competitive threat in the network management software market.

Software firm Computer Associates International Inc. Thursday announced an agreement to purchase Concord Communications Inc., a provider of network service management software.

Islandia, N.Y.-based CA said it has agreed to an all-cash transaction, valued at $17 per share, or about $330 million. The deal also includes the assumption of $20 million in debt from Marlborough, Mass.-based Concord for a total purchase price of $350 million. Concord posted a loss of $500,000 on sales of $106.2 million in fiscal 2004.

The companies said the acquisition, designed to expand CA's presence in the global enterprise management market, will bolster its presence in fast-growing areas such as VoIP and wireless networking.

Concord owns an intellectual property portfolio of more than 100 patents in network management. The company's eHealth technology monitors IP network traffic and predicts the bandwidth necessary to run complex applications, such as convergence applications using VoIP.

Concord's technologies will be integrated with CA's enterprise systems management business unit, one of five new divisions that CA formed this week under a restructuring of business operations. Jeff Clarke, CA's chief operating officer, said Concord's products will be added to CA's Unicenter brand of enterprise systems management software offerings.

Speaking on a webcast announcing the deal, CA CEO John Swainson claimed the deal will enable CA to offer the broadest enterprise systems management offerings in the industry.

This acquisition is CA's second high-profile acquisition of a Massachusetts company in recent months. It recently laid down $340 million to acquire Netegrity, a Waltham, Mass., software firm.

The companies said the majority of Concord's 640 employees will remain with CA after the completion of the transaction. Yogesh Gupta, chief technology officer of CA, said it is important CA maintains "a phenomenal retention rate" of staff as it did with Netegrity. "We really want these folks to stay with us," Gupta added.

According to Dennis Drogseth, vice president with Boulder, Colo.-based research firm Enterprise Management Associates, CA has spent years working to establish a presence in the network management marketplace.

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Drogseth said Concord's January acquisition of fellow management software maker Aprisma Management Technologies made Concord even more attractive to CA. He said Aprisma's network management features, coupled with performance management from Concord, make this acquisition a complementary fit.

Drogseth added, "While CA has worked to build much enhanced products in network management, including some good performance management products, clearly Concord with Aprisma provides dramatically improved market leadership with a lot of functional enhancements and advantages."

Ultimately, Drogseth said, this deal makes CA far more competitive as a total enterprise management play and it is sure to have an impact against other major players -- such as IBM, Hewlett-Packard Co. and BMC Software Inc. -- in making CA more of a threat.

Debra Curtis, a research vice president with Stamford, Conn.-based Gartner Inc., said CA customers can look forward to improved network management capacity unavailable previously from Unicenter. However, Curtis cautioned Concord and Aprisma customers to keep an eye on CA's integration plans.

CA said the deal is subject to regulatory clearance and Concord shareholder approval. The acquisition is expected to close in 90 days and will begin adding to CA's earnings in 2007.

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