Big Deals Fuel Quest Speculation
By ANDREW SIMONS
Some big pending software deals are reviving speculation that Irvine-based Quest Software Inc. could be acquired in a wave of industry consolidation.
The latest theory: Storage device maker EMC Corp. could be interested in buying Quest in a bid to expand its offerings. Quest makes software that keeps tabs on databases and other applications to make sure they’re running right.
“My perspective is that EMC wants more strength in software sales,” said Peter Kuper, an analyst with SG Cowen Securities Inc.
EMC joins a list of oft-cited potential Quest suitors, including database software kingpins Oracle Corp., Microsoft Corp. and IBM Corp. Then there’s Mercury Interactive Corp. of Sunnyvale, whose products overlap with Quest’s.
Talk of Quest being a target started earlier this year on word of rival Precise Software of Israel being acquired by Mountain View-based Veritas Software Corp. That deal concluded in June.
Now some even bigger deals are spurring speculation. Foremost is EMC’s pending buy of Mountain View-based Legato Systems Inc. for $1.3 billion. Legato makes database management and backup software.
Royal Bank of Canada analyst Sarah Mattson said EMC might look beyond basic storage software such as Legato’s to system monitoring products similar to Quest’s.
Then there’s Oracle’s blockbuster $6 billion bid for rival PeopleSoft Inc., which itself bought J.D. Edwards & Co. last week for about $1.8 billion.
Analysts say they don’t know whether an acquisition bid for Quest is in the works. They only say that they can see why it would work.
And why not? Quest boasts that its database management software helps customers get the most bang for their technology buck. Users interact with Quest’s software via a slick graphical interface, similar to the Windows operating system. With Quest’s software, companies easily can manage things such as ordering and payroll systems.
Such software would fit well at EMC, which became one of the most stellar companies in the 1990s by selling storage gear to Corporate America. These days, EMC is reshaping its business to rely less on hardware and more on software.
Quest’s software could be easily bundled with EMC’s storage devices. That Quest already has a sizable sales force sweetens the deal for EMC.
Quest Chief Executive Vincent “Vinny” Smith (photo) wasn’t available to comment for this story. He’s said before that Quest plans to stay on its own.
“He’s always sworn he would never sell the company,” said a source who has worked with Smith.
The official word from Quest is the company “doesn’t comment on rumors,” according to a spokeswoman.
Analyst Kuper said EMC could offer as much as 30% more than Quest’s recent market value of $1.1 billion.
“Let’s be honest,” he said. “Everything is for sale.”
Smith has proven adept at buying and selling companies. While in his 20s, Smith sold his Patrol Software in 1994 to BMC Software Inc., now a Quest rival.
In the past two years, Quest has been busy buying. In October, the company bought Toronto’s Sitraka Inc., a company that makes performance management software. Last year, Quest picked up Montreal-based BB4 Technologies Inc., a maker of system monitoring software.
“Vinny Smith has sold companies before. He’s proved himself very adept at mergers and acquisitions,” Kuper said.
