Quest Software Inc. has been on a buying binge.
The Aliso Viejo-based business software maker has been snapping up small companies that add to its list of products, which boost the performance of database, e-mail and other programs.
“Last year was a very acquisitive year,” said Mike Coffman, vice president of corporate development for Quest. “For the most part, they’ve been what we call ‘tuck-in’ acquisitions of companies in markets that we are already playing in. We did a bit of the tuck-in activity, but we were also going after more promising spaces where we see a lot of opportunity.”
Quest bought five companies in 2007, one in 2006 and three in 2005. In its most recent buy last month, the company bought the remaining 25% it didn’t already own of Vizioncore Inc., a Buffalo Grove, Ill.-based software maker.
“Their acquisition strategy has been fairly consistent over the years,” said Richard Sherman, an analyst at Greenwich, Conn.-based MKM Partners LLC. “They buy three or four companies a year. They augment their organic growth rate through small acquisitions.”
It’s “fun to go and spend $100 million a year” buying companies, Chief Executive Vinny Smith told the Business Journal a few years ago.
Smith said he “enjoys chasing the little companies.”
Most of the acquisitions are small enough that Quest doesn’t have to disclose what it paid.
The company specializes in software that improves on or helps manage other business programs from Oracle Corp., Microsoft Corp. and others.
Quest’s software typically boosts the speed and user-friendliness of databases and e-mail software.
Pushing Virtualization
The company is making a push into what’s called virtualization software, an area Smith has called “the next great frontier in information technology.”
“Virtualization is the monster trend,” analyst Sherman said. “If you are a company looking for big growth, virtualization is definitely the wave of the future in software.”
Virtualization software helps manage data spread across various computers as if it all were in one place.
“It makes it much more manageable, uses less space and power and makes it easier and more cost-effective to backup systems in the case of a disaster-recovery scenario,” Quest’s Coffman said.
Quest broadened its virtualization software in 2007 with the acquisitions of Suwanee, Ga.-based Invirtus Inc. and Reston, Va.-based Provision Networks Inc. Terms of the deals weren’t disclosed.
“For acquisitions we have done in virtualization, the early returns have been very positive,” Coffman said. “We are very bullish on the technologies and companies we’ve acquired and on the market as a whole.”
Last week, Quest had a market value of about $1.5 billion, which is down about 15% in the past month with a downturn in technology stocks. The company is set to report fourth-quarter results this week.
Wall Street expects sales of about $179 million, up 7% from a year earlier. Profits are seen coming in at $28.5 million, up 33%.
Quest has different levels of integration for its various buys.
For Vizioncore, Quest adopted the company name for a line of software and added an existing software maker to it.
Invirtus, which makes software that helps companies move to a virtual system, was folded into Vizioncore.
Provision Networks, which makes desktop virtualization software, is known as a division of Quest and operates fairly independently.
Almost all of the companies Quest buys keep their management teams in place, Coffman said.
“They are very good at acquiring businesses,” Sherman said. “They have a strong team and they don’t bite off more than they can chew. They have always done these neat, tidy acquisitions,nothing unmanageable.”
The company likes to scoop up software in growth markets, Coffman said.
One exception was Quest’s $90 million buy of Boca Raton, Fla.-based ScriptLogic Corp., a privately held company that makes network management software that runs on Microsoft’s operating systems.
“In the case of ScriptLogic, we were going after their customers and more specifically, their customer segment,small and midsize business,” Coffman said. “Much of their distribution and partner relationships were of value to us.”
Look for more buys from Quest, though at a little bit slower pace, Coffman said.
“We will continue to buy this year,” he said.
