Business software company Compuware Corp said it agreed to acquire privately held Gomez Inc for $295 million to offer unified application performance management services, amid consolidation in the technology space.
Gomez, which provides an on-demand platform to optimize the performance of web and mobile applications, counts the likes of Google Inc, Facebook and Overstock.com on its client list that includes about 2,500 brands.
While other players have fragmented solutions, only Compuware and Gomez can optimize application performance across the enterprise and the Internet, Compuware President Bob Paul said on a conference call with analysts.
Compuware, which makes computer programs that help large companies run data centers, competes with BMC Software Inc, CA Inc, International Business Machines Corp and Hewlett-Packard Co.
Lexington, Massachusetts-based Gomez had plans to go public but chose to be acquired instead. Technology-focused private equity firm Dolphin Equity Partners is the largest shareholder in Gomez.
The deal would be dilutive to fiscal 2010 results due to amortization expenses, which are estimated to be about $5 million per quarter, Compuware Chief Financial Officer Laura Fournier said, adding that the company will start seeing more positive impact in 2011.
While we believe the near-term dilution could be a drag on the shares, we see multiple benefits from this transaction, Rafferty Capital Markets analyst Kirk Materne said in a note.
As such, we would use any weakness due to the potential dilution from the deal as a buying opportunity as we believe this deal makes Compuware much more relevant in the performance management market going forward, analyst Materne said and reiterated a buy on the stock.
The deal is expected to close in November, Compuware said, adding that substantially all of Gomez's 272 employees, including its leadership team, are expected to remain with Compuware.
By 2011 more than 50 percent of Fortune 500 companies will interact directly with their customers via mobile devices, Compuware's Paul said citing industry research from Gartner.
M&A activity has been heating up in the technology sector and analysts expect more deals to come. In July, Intel acquired software company Wind River Systems Inc; in September, Xerox Corp said it will buy Affiliated Computer Services Inc and Dell Inc said it planned to buy Perot Systems Corp.
Last week, Cisco Systems Inc struck a deal to buy Norwegian videoconferencing company Tandberg for $3 billion.
Shares of Detroit-based Compuware were up 2 percent at $7.30 in afternoon trade Wednesday on Nasdaq. (Reporting by Manasi Phadke; Editing by Gopakumar Warrier)