Veritas Picks Up Precise

After two and a half years of intense negotiations, Veritas Software Corp. (Nasdaq: VRTS) finally completed its acquisition of application performance management vendor Precise Software Solutions Inc. (Nasdaq: PRSE) today, handing over $609 million to the companys shareholders (see Veritas Eats Precise ).

The deal, which was originally priced at $537 million, called for the software giant to pay approximately $400 million in cash, along with 7.4 million Veritas shares worth $209 million (see Veritas Gets Precise). Veritas's stock, which has leaped nearly 85 percent since the beginning of the year, was up 2.1 percent this afternoon, trading at $29.17 a share.

Precise, which has experienced 22 consecutive quarters of revenue growth, with sales totaling $76 million last year, produces software for application performance monitoring and storage resource management.

Today’s acquisition, along with Veritas’s already completed acquisition of automated server provisioning software vendor Jareva Technologies, is part of the company’s strategy to move up the stack and away from being a pure storage play (see Veritas Moves up the Stack). While Veritas already has plenty of offerings aimed at identifying and solving resource and performance problems at the storage layer, adding Precise’s software will allow its customers to solve the same problems at the application level, the company says.

For instance, by adding Precise's application performance management software to its product portfolio, Veritas could identify slowdowns in database traffic and pinpoint the root causes, such as an overloaded server. This kind of centralized control over IT resources is getting more popular, Veritas CEO Gary Bloom said on a conference call this morning.Amazon.com, which is already both a Veritas customer and a Precise customer, says the acquisition seems to make sense. “We use them both consistently, just in different spaces,” says Mark Swann, Amazon director of database systems and engineering. “We see the Precise acquisition as very complementary of the Veritas product line.”

Some analysts, though, caution that, while the deal seems to be a good idea, Veritas still has to do more than talk the talk. “This is potentially a good thing,” says A.G. Edwards analyst Shebly Seyrafi. “I think it does make sense in light of [recent storage trends]. But they need to execute and they need to convince investors that they can do other things than storage… There are some investors that are skeptical.”

Veritas, for its part, insists the acquisition will soon pay off. Reiterating previously stated financial targets for the deal, Bloom said the company expects Precise’s products to bring in between $45 million and $55 million in revenues over the next two quarters.

The acquisition will have no impact on its second quarter, which ends today. But by 2004, it will contribute to the overall earning per share, Bloom says. Veritas expects its second-quarter earnings to be between 9 cents and 10 cents a share on revenue of $370 million to $380 million.

Veritas has already done all the interoperability testing between its existing products and the Precise i3 application performance management software, now Veritas i3, and the Precise StorageCentral storage resource management software, now Veritas StorageCentral. According to Kris Hagerman, executive VP of Strategic Operations, commingling of codes and the total integration of the technologies will be completed over the next six months, with integrated products expected to be available in the first half of next year. The company has started to integrate its two sales teams. It will release more details on the technology integrations in three months' time.The first products to be integrated will likely be the StorageCentral with Veritas’s existing SRM product, SANPoint Control (see Veritas Plugs SRM Gaps). “Over time, we’ll bring these products closer together,” Bloom said on today’s call. “Clearly there’s a lot of synergy there.”

In separate releases today, the company also announced that CDW Corporation and Dell Computer Corp. (Nasdaq: DELL) have signed on to be distribution channels for the StorageCentral SRM product, and that Electronic Data Systems Corp. (EDS) is a customer for the new i3 APM product.

Although Veritas initially said it would hold onto all 460 of Precise’s employees, Bloom and Hagerman said today that about 40 people have not been invited to move over to the larger company. This is due to overlap in function, the execs claim, and they insist that approximately the same number of people will be hired back into other functions. Veritas has also let go some of its own employees, but wouldn’t say how many jobs had been cut.

— Eugénie Larson, Reporter, Byte and Switch