CA Acquires ITKO - Analyst Blog
30 Juin 2011 - 12:45PM
Zacks
Information technology (IT)
management software company, CA Inc. (CA) recently
announced that it has acquired privately-held Interactive TKO, Inc
for approximately $330 million in cash. The company is a leading
provider of service simulation solutions for developing
applications in composite and cloud environments.
This acquisition is expected to add
a critical dimension to modern IT management and enhance the
efficiency of the entire service delivery life cycle. In
particular, the acquisition will help customers overcome the
limitations of current organizational approaches, breaking down the
silos across development, testing and operations.
CA expects the deal to be completed
in three months. The company expects the acquisition to affect
profit in fiscal 2012 and 2013 but be accretive to 2013 adjusted
earnings. Interactive TKO delivered $39.0 million in revenues in
its last fiscal year that ended on March 31, significantly up from
the previous year.
The news of this acquisition helped
CA Inc. shares move up 16 cents and finish at $22.63.
Moreover, this acquisition marks
the continuation of CA’s strategy to grow inorganically, which
strikes a balance between investmenting to grow the company and
returning cash to shareholders. The company has repurchased shares
worth $150.0 million so far in fiscal 2012.
In September 2010, CA announced the
acquisition of Texas-based enterprise software company Hyperformix
Inc. with the intention of integrating Hyperformix’s operations and
intellectual properties with its Virtualization and Automation
business. With the acquisition, CA Technologies has extended its
virtualization, automation, assurance and cloud-based
portfolio.
The combined solution offered by
the collaboration ensures proper planning and implementation as
well as management of cloud solutions, which can be integrated with
existing IT infrastructure.
CA is slowly tapping the huge
opportunity prevalent in the virtualization/cloud computing space,
which should help its growth over the next 2-3 years. This apart,
through the acquisition of the cloud computing company Oblicore, CA
acquired additional technical know-how that could boost its cloud
computing business. Therefore, the company appears to be set to
benefit from the huge potential of the virtualization/cloud
computing domain from 2011 onward.
The company posted modest fourth
quarter results, in line the Zacks Consensus Estimate although
revenues failed to beat the Zacks Consensus Estimate. However, the
product demand trend noticed in the quarter was encouraging.
Keeping in mind the quarter’s revenue backlog, we consider the
fiscal 2012 guidance a bit conservative. We believe that CA Inc.’s
endeavor to return shareholder value through share buybacks and
dividend increases could boost investor sentiment.
On the other hand, we are a bit
concerned about intense competition in the software & cloud
computing space from big players, such as International
Business Machines (IBM) and Hewlett-Packard
Company (HPQ). This apart, its high debt balance and
European exposure may pose some challenges going forward.
Currently, CA Inc. has a Zacks #3
Rank, implying a short-term Hold rating.
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