Aliso Viejo-based Quest Software Inc., which is dealing with one of the more notable stock option grant probes locally, is an “attractive takeover candidate,” according to one analyst.
Zaineb Bokhari of Standard & Poor’s said as much in a recent interview on Forbes.com.
Talk of Quest being bought isn’t new. As a smaller player in a sector dominated by big names, Quest long has been a rumored target of Oracle Corp., Microsoft Corp., IBM Corp. and others.
Bokhari brings the company’s options ordeal into the equation.
Quest’s ability to execute “could be impaired if senior management were implicated in any wrongdoing,” the analyst said.
The company makes software to monitor the performance of databases and other programs. Quest has seen problems since the Securities and Exchange Commission launched a probe of the timing of past stock option grants in June.
In July, Quest said it plans to restate results from 2000 through the first quarter of this year to account for option grants.
An internal board committee was set up to probe the matter, with no end date in sight yet.
In November, Quest’s senior vice president of corporate development and former chief financial officer resigned after declining to be interviewed for the probe.
M. Brinkley Morse handled the company’s investment and acquisition strategy since 2005 and was financial chief from 2001 to 2005.
Morse’s lawyer told the special committee that he declined to be interviewed before his resignation on Nov. 25.
Quest said it expects “expenses arising from the investigation, the restatement and related activities, which will be reported in the periods incurred, will be significant.”
Analysts aren’t worried.
A PiperJaffray analyst recently upgraded Quest to “outperform” from “market perform,” saying the company is stable to improving and that the options probe doesn’t appear to be impacting business.
Standard & Poor’s Bokhari said Quest is a “particularly strong competitor in database software management.”
She forecasts revenue growth of 8% in 2007. Quest is on track to have $540 million in sales this year.
Quest is one of several local companies wrestling with options investigations, including Irvine chipmaker Broadcom Corp. and Lake Forest-based disk drive maker Western Digital Corp.
Sage Reports Record Sales
Irvine’s Sage Software Inc., Orange County’s largest software maker by sales, said revenue hit a high for the 12 months through Sept. 30, coming in at $652 million.
Sage Software is a unit of Britain’s Sage Group PLC.
North American revenue from the Irvine operation made up about 40% of Sage Group’s global sales of $1.7 billion, a 22% rise from a year earlier.
The company’s software helps businesses manage accounting, inventory, payroll and maintain customer contacts, among other functions.
Sage Software targets small companies with 25 or fewer workers and midsize companies with up to 500 employees.
It added some 500,000 customers this year, for a total of 5.2 million worldwide.
Sage Software made several acquisitions this year.
The biggest was a $565 million cash deal for Emdeon Practice Services, which makes software to manage doctors’ practices.
Emdeon was part of Elmwood Park, N.J.-based Emdeon Inc.
The buy, which closed in September, was folded into the Sage Software Healthcare division.
Hirsch Expands in Europe
Santa Ana-based Hirsch Electronics Corp., a maker of security management systems for the government and businesses, said it plans to expand in Europe.
The company is adding sales staff and technical support workers at its office in Milan.
In Italy, Hirsch supports customers in Sweden, Ireland, the United Arab Emirates and South Africa.
“They like that we are near their time zone and maintain an inventory for quick delivery,” said Nicola Caletti, managing director for Hirsch’s European, Middle East and Africa division.
Hirsch was started in 1981 with a unique product: the ScramblePad. It’s a device that “scrambles” digits on a telephone-like keypad so they come up in a different position every time, protecting codes from being stolen.
The product was snatched up by government intelligence agencies and the company has been a player in the security device market since.
Today, the privately held company makes both the devices and software that keep large networks secure.
Banks, hospitals, universities, labs and manufacturers use Hirsch’s products.
A local customer: Nordstrom at South Coast Plaza.
