FRAMINGHAM (04/01/2004) - IBM Corp. Thursday announced plans to acquire management software maker Candle Corp., a longtime partner and sometime competitor.
Executives from both companies discussed the proposed acquisition in a conference call Thursday. Financial details of the acquisition were not disclosed. The acquisition is subject to customer regulatory approvals and is expected to close in the second quarter. The companies will continue to operate separately until the deal closes.
IBM and Candle, technology partners since 1976, began discussing the potential of an acquisition about four months ago, said Robert LeBlanc, general manager for Tivoli Software from IBM. Candle's mainframe systems management and analysis capabilities -- particularly its expertise with performance and availability management on high-end zSeries machines -- will fill gaps in IBM's technology offerings.
"I wish we had all the capabilities to provide end-to-end technology, but we don't. We have to continue to partner and add new technology to offer that end-to-end environment to our customers," LeBlanc said. He added Candle software will be integrated across IBM's software divisions: DB2, Lotus, Rational, Tivoli and WebSphere.
"In some cases, Candle will fill gaps, but in others, it will be more complementary and offer deeper analysis," he said.
For Candle, the acquisition seemed the better of two choices in today's increasingly competitive market. Andy Mullins, Candle president and chief operating officer, said because of changes in the marketplace and technology buyer's attitudes, Candle either had to embark on a huge growth plan or merge with another company.
"Today, buyers are looking for single provider to offer more of a total solution across their environments," Mullins said. "We knew we had to either dramatically expand our own portfolio or partner to fill it out. The best path for us was to merge with IBM."
Founded in 1976, Candle garnered much success in the early 1980s with its Omegamon suite of mainframe management software products. In 2002, the company expanded its product line with its PathWAI portfolio. According to Candle, PathWAI software and consulting packages helped customers design, test, deploy and manage Web server and middleware infrastructures, such as IBM's WebSphere.
Joining forces could help IBM and Candle hold onto customers and potentially get into new accounts. According to Jasmine Noel, principal at Ptak, Noel & Associates, there "is still money to be made" in the mainframe systems management market, despite its maturity.
"Competition is becoming extremely fierce, and the goal is to grab as much market share as possible. Since cost of switching customers is incredibly high, it is easier to buy the competition," she says.
And as competition for data center customers increases among the big management vendors, expect to see more acquisitions along these lines. Established firms such as Compuware Corp., Heroix Corp. and ASG could be acquired by the likes of BMC Software Inc. or Computer Associates International Inc. primarily to maintain market share numbers against IBM, she says.
Yet the IBM acquisition of Candle could have its downsides. Tivoli Software represents the most direct competition for Candle products, and there is much overlap among the offerings.
"We think most of the potential tension between IBM Tivoli and Candle ... there is so much overlap between the products it is unclear which products will be promoted," Noel says. "It is absolutely critical for IBM not to lose any of the Omegamon and PathWAI customers during the acquisition. This means IBM can't just dump the Candle products and/or force them to upgrade to Tivoli products."
IBM last month announced plans to acquire Trigo Technologies Inc. and expand its portfolio of WebSphere integration middleware with data synchronization software from the company.