Investments in technology are supposed to improve business, right? Well, as companies implement various systems from the likes of Sun Microsystems
That's a big advantage for a company like Quest Software
Quest announced this week that it's buying Vintela, a privately held firm that focuses on integration solutions for the Microsoft platform, as well as on organizations that use Unix, Linux, Mac, and Java systems.
About five years ago, Quest itself decided to invest in Windows integration products. Its purchase of Vintela will allow for stronger user authentication, improved security-policy enforcement, and better audit/compliance functions -- all more crucial areas in light of new federal regulations like Sarbanes-Oxley and the Health Insurance Portability and Accountability Act (HIPAA). Vintela's platform streamlines user activities and enables users to log on to non-Windows-based platforms via Microsoft's identity systems -- an important feature as techies make moves toward the vaunted idea of "interoperability."
Buying growth isn't cheap. The acquisition of Vintela will cost Quest $56.5 million in cash and the assumption of the option plan, which will be backed by 1.5 million shares of Quest common stock. (Keep in mind that the revenue-run rate for Vintela is roughly $12 million-$13 million annually.) And the deal will be dilutive to 2005 pro forma earnings per share for Quest, at $0.02 per share.
On the bright side, Quest's first-quarter revenues increased 25% to $103.3 million, while net income increased from breakeven to $9.2 million, or $0.09 per share. Given the otherwise mixed results in the software market, this is a standout performance.
While a tech acquisition typically rattles investors, it didn't happen with the Vintela acquisition. On the news, Quest's stock price fell only $0.24 to $12.91, a good indication that investors consider this a long-term investment in Quest's focus on the Microsoft platform.
Fool contributor Tom Taulli does not own shares of companies mentioned in this article.