A 2007 acquisition by Quest Software Inc. has brought sales of business programs to administrators at federal agencies looking to beef up computer security.
The Aliso Viejo-based company, which makes software that boosts the performance of databases, e-mail and other programs, is gaining government business thanks to customers it inherited last year with its $90 million buy of Boca Raton, Fla.-based ScriptLogic Corp.
“ScriptLogic was an important fit for Quest,” Bob Crosley, manager for Desktop Authority, a desktop management program, at ScriptLogic’s Tampa, Fla., operations. “Where Quest had tremendous success in the enterprise and with large corporations, ScriptLogic’s (success) has been in government agencies.”
Quest’s bread and butter clients are midsize and large businesses looking to improve workflow and administrative tasks in their offices.
The company’s software typically helps manage other business programs from Oracle Corp., Microsoft Corp. and others.
With ScriptLogic, Quest has been going after the administrators at the departments of Defense, Homeland Security and Justice.
The ScriptLogic buy “was a little down market from where Quest saw itself,” Crosley said. “But the tools the two companies make fit together very well with minimal overlap. It helped round things out for Quest.”
The company’s move into government software comes as many industry watchers are worried about a falloff in corporate spending on software amid the slowing economy.
Quest sees a chance for sales on the heels of a government mandate, dubbed the “federal desktop core configuration,” which is requiring stricter security standards for office PCs of government workers.
“What’s interesting about any regulations or mandates from the government is that it kind of drives software adoption,” said Jeff Stratyner, manager of alliance solutions for Quest in Rockville, Md. “They point to very specific, real needs in our markets. They are markers of problems that people are trying to solve.”
ScriptLogic recently struck a deal with Herndon, Va.-based DLT Solutions Inc., a reseller of technology products and services to the government, to market a software program that makes Microsoft Corp.’s Active Directory work more efficiently.
Active Directory, which runs on Windows-based systems, allows administrators to assign policies, deploy software, apply updates and store settings in a database.
Layered Profiles
One of ScriptLogic’s programs creates another layer in the database that stores profiles for certain types of workers that need to use company computers.
The profiles help get new workers up and running quickly on a PC, while giving the correct level of access and security for the job.
“It’s important from the perspective of providing a reliable machine configured the way the company wants it (to be) configured,” Crosley said. “You need to provide them with a secure, consistent environment for working and give them access to the stuff they need but not the stuff they shouldn’t see.”
It also creates profiles based on company security rules, which are based on criteria such as what office, level and department a person works in, and automatically configures the computer.
Quest sold to the government before the ScriptLogic acquisition.
It has a public sector division in Maryland that targets federal, state and local government agencies, big school districts, colleges, universities and defense contractors.
ScriptLogic has some 200 workers, mostly in Florida.
Roughly 10% to 15% of Quest’s expected $720 million in 2008 revenue is from government sales, according to Quest’s Stratyner.
“The government is really trying to standardize things on the technology front,” he said. “It creates a huge opportunity for a software company like us. It really is a thriving part of our business.”
That may be good news to Wall Street, which has seen Quest’s shares fall about 10% in the past three months with a market value of $1.3 billion last week.
Some analysts have expressed concerns about shrinking profits at Quest.
“Our model shows that Quest would have to exceed the upper end of revenue guidance by more than $28 million to meet its margin target,something we think is unlikely in this current environment,” Richard Sherman, an analyst for Greenwich, Conn.-based MKM Partners LLC, said in a note to clients.
Sherman lowered his estimate for operating margins,profits expressed as a percentage of sales,to about 16% for the year. That’s less than Quest’s own estimate of 17.5% to 18.5%.
Still, Sherman said he expects Quest to surpass its $720 million revenue estimate for the year.
On average, analysts are expecting Quest to see roughly $101 million in profits on sales of $719 million.
