(BMC) BMC Software Eyes NEON Enterprise Software Assets

BMC  Software Inc. (BMC) announced that it had entered into an agreement with NEON Enterprise Software, the leading mainframe management software company, to purchase its Information Management System (IMS) database products.

The acquisition is expected to further enhance BMC’s IMS database management portfolio, providing the most comprehensive suite of solutions, which will help the company address the current IT challenges with big data, database availability and data analysis, all within the organization’s IMS environment.

Companies across the globe are adopting mainframe and IMS databases to support critical services such as web-based online transactions, banking transactions and airline reservations. By adding NEON Enterprise Software’s IMS products to BMC’s existing offerings, the company expects to satisfy the organizations’ need for industry-leading, high-performance solutions, which lead to better management and optimization of IMS environments, as well as reduce operating costs and improve business service delivery.

BMC has been on an acquisition spree over the last couple of months. The company acquired a web application performance monitoring (APM) solutions provider, Coradiant Inc., but did not disclose the financial terms of the deal.

Application performance management is a new domain within systems management that focuses on monitoring and managing performance and service availability of a software application. According to a research conducted by the U.S. research firm Gartner, end users will increasingly favor vendors that move beyond experience monitoring to behavior monitoring.

With this acquisition, BMC Software can now efficiently compete in the APM space with ace systems management vendors such as CA Inc. (CA), Hewlett-Packard Co. (HPQ) and International Business Machines Inc. (IBM).

Moreover, we believe that the recent segregation of the company’s MSM and ESM businesses will enhance clarity regarding the performance of each business, provide better execution through increased focus and will also make pricing more beneficial to growth and value investors, possibly facilitating further M&A activities.

Acquisitions have expanded BMC Software’s product portfolio, leading to more comprehensive solutions. Growth prospects in the SaaS and virtualization segments, favorable position in the government vertical and strong cash generation abilities are other positives for the company.

However, the company needs to seriously work on its cloud computing strategy, and we are concerned about the intensifying competition from big players like International Business Machines, Hewlett-Packard Company, EMC Corp. (EMC) and CA Inc, which bundle hardware and software offerings. BMC has a Zacks #3 Rank, which translates into a short-term Hold rating.

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