Information technology (IT) management software company, CA Inc. (CA) recently announced that it has entered into a definitive agreement to acquire privately held Watchmouse B.V., an innovator in SaaS-based monitoring for cloud, mobile and traditional Web applications.
With this acquisition, the company expects to utilize the solutions provided by WatchMouse by exploiting the globally-distributed infrastructure of more than 60 monitoring stations in more than 40 countries. Utilizing the technology enabled infrastructure, the company replicates real-user transactions from these locations to provide rich, up-to-the-minute insight into application performance and availability.
This technology is expected to add a critical dimension to modern IT management and enhance efficiency in the IT delivery process of the company. In particular, the acquisition will help customers overcome the limitations of current organizational approaches, breaking down the silos across development, testing and operations.
Moreover, this acquisition will strengthen the company’s CA Application Performance Management (APM) solution, which may in turn help provide large enterprise customers with comprehensive and flexible options to manage their applications within a single solution set.
Moreover, Watchmouse is also expected to facilitate the implementation of Nimsoft IT Management-as-a-Service strategy by enabling customers to quickly and easily monitor response times for different types of business services—from the cloud to the data center.
This acquisition marks the continuation of CA’s strategy to grow inorganically, which strikes a balance between investments for further growth and returning cash to shareholders.
Apart from pursuing growth through acquisitions, the company is leveraging cloud computing to enable organizations to source the best components—internal, external, private cloud, public cloud, mobile and more—to construct the most competitive business applications without wasting much time and resource.
The company is also focused on providing advanced management and security software required by organizations to take full advantage of this evolution.
CA is slowly tapping the huge opportunity prevalent in the virtualization/cloud computing space that should drive growth over the next 2-3 years. Earlier, CA acquired cloud computing company, Oblicore, to boost its cloud computing business. Therefore, the company is set to benefit from the huge potential of the virtualization/cloud computing domain going forward.
CA Inc. posted decent first quarter results exceeding earnings estimates. Revenue also improved on a year-over-year basis. However, the product demand trend was moderate in the reported quarter. Keeping in mind the quarter’s revenue backlog, we believe fiscal 2012 guidance is a bit conservative. We further believe that CA Inc.’s endeavor to return shareholder value through share buybacks and dividend increases will boost investor sentiment.
On the other hand, we are apprehensive about intense competition in the software & cloud computing space from big players, such as International Business Machines (IBM) and Hewlett-Packard Company (HPQ). In addition, the company’s high debt balance and European exposure may pose some challenges going forward.
Currently, CA Inc. has a Zacks #3 Rank, implying a short-term Hold rating.
