Opsware deal: Boon to BladeLogic
by Cheryl Meyer Posted 05:44 EST, 24, Jul 2007

With Opsware Inc. off the block following its acquisition on Monday, July 23, by Hewlett-Packard Co. for $1.6 billion, attention is turning to rival BladeLogic Inc. as another provider of data automation software that could attract suitors.

The Lexington, Mass.-based company will be "gone in no time," predicted Ronni Colville, an analyst with Gartner Inc., noting that BladeLogic and Opsware are the two leading vendors of technology used by corporate customers to manage their data centers. "There are a lot of vendors in the $30 million to $50 million space, but there's no one that looks like BladeLogic or Opsware," she said.

For now, BladeLogic appears content to measure its value among investors. The company, which is expected to go public this week, on Tuesday repriced its initial public offering at $16 to $17 per share, up from the $12 to $14 range it had previously proposed. The company is seeking to raise up to $97.7 million, according to an amended regulatory filing. Morgan Stanley and Merrill Lynch & Co. will serve as joint bookrunning managers for the offering, while Citigroup Global Markets Inc., Wachovia Capital Markets LLC and Cowen and Co. LLC will serve as co-managers.

"One thing is for sure- — they will have a hot IPO," said Tom Taulli, founder of DealProfiles.com, a research firm focused on the IPO and venture capital markets. "They did get a gift from heaven this week because it just set the bar in terms of valuation. This [IPO] will be a rocket ship this week, and it's in a market that is out of control."

BladeLogic has raised financial backing from Battery Ventures, Bessemer Venture Partners, Globespan Capital Partners and MK Capital. Its last reported funding came in September 2005, when it raised $7 million in a Series D round.

Longer term, possible buyers for the company run the gamut. One company likely to be interested is BMC Software Inc., said Scott Sweet, managing partner with research firm IPO Boutique. BMC last week acquired a similar technology maker, RealOps Inc., for undisclosed terms.

Galen Schreck, an analyst with Forrester Research, believes Islandia, N.Y., enterprise software giant CA Inc. may be the best fit for BladeLogic because other data automation players, such as BMC, HP and IBM Corp., have product overlaps with BladeLogic. "CA, on the other hand, doesn't really have anything like that," Schreck said.

EMC Corp. of Hopkinton, Mass., is another possible buyer. The storage giant has acquired information technology management companies in recent years.

Colville said that if BladeLogic were bought, it would command roughly the same price multiple as HP's offer for Opsware, which was valued at 55.7 times the company's 2008 earnings per share estimate of 26 cents and 8.1 times its 2008 revenue forecast of $198 million, according to a recent research note by CIBC World Market Corp. analyst Brendan McCabe.

Potential buyers have previously expressed interest in BladeLogic, but president and CEO Dev Ittycheria did not want to sell, Colville said.

But while BladeLogic is growing quickly, it is still losing money and operates in a highly competitive sector, said Ken Bender, managing director at Software Equity Group LLC, a San Diego boutique investment bank specializing in software.