Christmas came early for BladeLogic (Nasdaq: BLOG). Two days before its IPO, Hewlett-Packard (NYSE: HPQ) bought rival Opsware (Nasdaq: OPSW) for $1.65 billion -- a nosebleed valuation of 15 times trailing-12-month revenues. That deal proved to be rocket fuel for BladeLogic, helping its IPO surge 47% to $25.07.
BladeLogic addresses a big problem in modern business: managing the complexities of data centers. The company's software automates the management of servers, changes in applications, and even regulatory compliance. Its benefits include minimal downtime, lower costs, and faster deployment.
BladeLogic's roughly 200 customers include major players such as AT&T (NYSE: T), Merck (NYSE: MRK), and Starbucks (Nasdaq: SBUX). Ten of its customers rank in the Fortune Global 50.
BladeLogic's growth has been blazing. For the six-month period ended March 31, 2007, the company logged $27.1 million in revenue, up from $12.2 million in the same period in 2005.
The expansion of BladeLogic's market has attracted a raft of major competitors. The company must fight for business against companies such as BMC (NYSE: BMC), IBM (NYSE: IBM), and Symantec (Nasdaq: SYMC). The HP-Opsware linkup should make things even tougher.
BladeLogic claims that its compliance features, which help customers deal with Sarbanes-Oxley, HIPAA, and other regulations, provide a major differentiator from its competitors. But remember, such advantages can be fleeting in the rapidly changing tech space.
At its current valuation, the stock is trading at 13 times trailing-12-month revenues. That's a high price tag, even with the possibility of further rapid growth. The HP-Opsware deal generated considerable hype, and even spurred rumors that BladeLogic might get bought out. Foolish investors are probably better off letting things calm down before considering this one.
Further Foolishness cuts to the chase:
Starbucks is a
Stock Advisor
pick, while Symantec is an
Inside Value
selection. Try any of our Foolish newsletters free for 30 days.
Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. He is currently ranked 2,419 out of more than 60,000 total participants in Motley Fool CAPS.
Terms & Conditions
RSS Headlines
Fool UK