Quest Software Inc. has a bit of an identity crisis on its hands.
After dozens of acquisitions in recent years, the Aliso Viejo-based maker of business software is looking to present a unified front to its corporate customers.
“We want to identify ourselves as more than just the sum of the products we have,” said Carl Eberling, general manager of Quest’s virtualization and monitoring business units.
Quest is challenged by “this whole question of identity,” said John Enck, an analyst at Stamford, Conn.-based market researcher Gartner Inc.
“Who is Quest?” he said. “They are a holding company, almost, of database, virtualization and Microsoft-related software. It’s a conglomerate of unaffiliated products.”
Quest makes software that manages and improves on other business applications by Microsoft Corp., Oracle Corp., IBM Corp. and others.
The software automates tasks performed by technology departments and helps companies get the most out of their servers.
Quest, which has about $700 million in yearly sales, typically does a deal or two every quarter in which it picks up a small, usually private, software maker and folds it into its product lineup.
The strategy has roots in Quest’s formative days under former chief executive and now Chairman Vinny Smith, who routinely bought and integrated smaller companies.
After a breather in 2009, Quest returned to buying this month with the acquisition of Germany’s Völcker Informatik AG, a privately held maker of software that helps manage security, access and identity verification for corporations.
Terms of the deal, presumably small, weren’t disclosed.
Deal Fallout
Doing lots of little deals is great—up to a point, according to Gartner’s Enck.
“Quest is not a tiny little company,” he said. “All of those markets have different dynamics and, frankly, there’s no relationship within Quest between all those offerings.”
Quest now is reintroducing itself to customers as a comprehensive provider of business software, not just as a provi- der of one-off fixes to a particular tech problem.
“We’ve been thought of too long as ‘that company that owns Toad,’” said Eberling, referring to a popular database management software program that’s short for “tool for Oracle application developers.”
Chief Executive Doug Garn, who succeeded Smith in 2008, has sought to streamline Quest under two broad product categories.
Eberling handles Quest’s virtualization and monitoring software units. Steve Dickson oversees database and Microsoft Windows products.
Recent Hires
Quest, which likes to promote from within its own ranks, also brought in some outside executives this year.
It recruited Eberling from Kaiser Permanente, where he was senior vice president of information technology. It also hired Steve Kahan as vice president of marketing.
Bringing in outsiders “is a new move for Quest,” Eberling said. “They haven’t sought that outside influence as actively as they have the past year. We have been going after a different approach.”
Eberling heads Quest’s fastest growing unit, which includes a product lineup of what’s called virtualization software that helps companies cut down on data storage costs.
Quest has made a handful of virtualization buys.
In 2007, it bought the remaining 25% it didn’t already own of Vizioncore Inc., a Buffalo Grove, Ill.-based software maker.
That same year it picked up Suwanee, Ga.-based Invirtus Inc. and Reston, Va.-based Provision Networks Inc.
The deals “have really put us in an enviable position,” Eberling said.
Yet Quest’s rollup strategy doesn’t help the company appear cohesive to outsiders, Gartner’s Enck said.
“They really have to solidify their position and be greater than the sum of all of their independent parts,” he said.
Quest is likely to see a boost this year as companies ramp up tech spending after holding off on replacing or upgrading computers and software in 2009.
Industry watchers say there’s set to be what’s called a “server refresh,” in which companies buy products en masse.
“Quest should benefit from Microsoft business software updates, particularly the server refresh cycle,” said Mary Johnston Turner, an analyst at Framingham, Mass.-based market researcher IDC Corp. “The biggest challenge for Quest is to better position itself as a more long-term strategic supplier.”
Gartner’s Enck said he sees some upside for Quest as Microsoft updates its business software.
“They are invested in multiple, completely different markets, so Quest’s fate will rise and fall along with them,” he said. “As Microsoft refreshes its infrastructure on the server side, Quest tends to ride along nicely.”
Wall Street
Investors aren’t so convinced lately.
Quest’s shares have been trading sideways for some time and are roughly flat since the start of the year.
Its results have been choppy for the past few quarters. Analysts are expecting tepid growth for second quarter.
Wall Street analysts are expecting Quest to post $25 million in second-quarter profits, up 3% from a year earlier, on sales of $171 million, up 4%.
“Although we expect the company to benefit from continued improvement in its go-to-market strategy, we remain cautious on Quest until the company exhibits better quarter to quarter consistency,” said Philip Winslow, an analyst at Credit Suisse Securities LLC in New York.
Winslow has a “neutral” rating on the stock.
Quest, which had a recent market value of $1.7 billion, is set to report results next week.
