NaviSite Acquires Surebridge, Expands Portfolio

NaviSite on Thursday said it has agreed to acquire Surebridge in a cash and stock deal expected to broaden NaviSite's portfolio of hosted services to include business software from Microsoft,

May 7, 2004

2 Min Read
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NaviSite on Thursday said it has agreed to acquire Surebridge in a cash and stock deal expected to broaden NaviSite's portfolio of hosted services to include business software from Microsoft, PeopleSoft and Siebel Systems.

Under the agreement, Navisite will provide two promissory notes for $39.5 million, subject to certain adjustments based on Surebridge's financials at closing, and issue 3 million shares of common stock valued at $14.7 million, based on Wednesday's closing price of $4.90.

The acquisition would create a $125 million technology services company with more than 1,200 customers, the companies said.

NaviSite, based in Andover, Mass., manages applications and software infrastructure for mid-market companies, as well as messaging applications built on Lotus Domino and Microsoft Exchange software. Surebridge, Lexington, Mass., hosts business applications from Microsoft, PeopleSoft and Siebel Systems.

NaviSite stumbled after the bursting of the dot-com bubble, when companies lost interest in the concept of subscribing to application services hosted over the Internet. The concept of renting software as an alternative to licensing it has gone through a revival in the last year, and NaviSite has managed to make a comeback by improving revenues and cutting losses."The whole notion of outsourcing has become more interesting in the marketplace, so this is a good time for vendors to get back in," Helen Chan, analyst for The Yankee Group, said.

Adding Surebridge's application services broadens NaviSite's portfolio, particularly in the mid-market, which Yankee defines as companies with 500 to 2,500 employees.

"They can provide more of a complete solution for their end users," Chan said.

Being able to offer PeopleSoft applications gives NaviSite services that may be of interest to the enterprise market, Yankee analyst Andy Efstathiou said. But the difficulty will be in convincing companies to open their wallets.

"It certainly makes them more compelling to enterprises, but they'll still have to make that case," Efstathiou said.The technology services market has seen quite a bit of consolidation over the last couple of years. NaviSite alone has acquired several companies since late 2002, including Clearblue Technologies Management, Avasta, Conxion and Interliant. Other acquisitions include Siebel's late 2003 purchase of UpShot, which hosted customer relationship software.

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