CA Completes 3Tera Acquisition - Analyst Blog

Leading information technology (IT) management software company CA Inc. (CA) has finally declared the completion of the acquisition of a cloud computing company 3Tera Inc. This is the second acquisition that the company has completed, since the Nimsoft Corp. acquisition that was closed on March 17. 

We believe that 3Tera is a good pick by CA. The company enables enterprises and service providers to provision, deploy and scale public and private cloud computing environments, while maintaining full control, flexibility and reliability. As CA is trying to strengthen its position in the cloud computing domain, 3Tera seems to be an ideal fit for the company. CA’s emerging opportunity in the virtualization/cloud computing space is significant and could help accelerate growth over the next 2-3 years. 

The company has adopted the acquisition strategy to fuel growth and has made a series of acquisitions in recent times. In September 2009, CA acquired a privately held company NetQoS, Inc. for $200 million in cash. The acquisition is expected to combine the CA eHealth Network Performance Manager, CA Spectrum Infrastructure Manager and NetQoS Performance Center. This will offer better visibility and control of critical services in their physical and virtual network and systems environments to CIOs and network engineers and operations managers.
 
In January 2010, the company acquired a private business software provider and cloud computing company, Oblicore Inc. This acquisition is expected to help CA strengthen its software development services and help service clients better. Additionally, there would be technological exchange between the two companies as well. We believe acquisitions will add scale and increase business volumes for CA. 

As per the recent findings of the market research firm IDC, over the next five years, spending on IT cloud services will grow almost threefold, and will reach $42 billion by 2012, accounting for 9% of revenues in five key market segments. More importantly, spending on cloud computing will accelerate throughout the forecast period, capturing 25% of IT spending growth in 2012 and nearly a third of growth in the following year. IDC expects the recent financial crisis to be catalytic to the adoption of cloud computing. We believe that CA, being a major player in this market, will reap benefit from these trends. 

The company reported an in-line third quarter in fiscal 2010 and provided a positive outlook for full fiscal year 2010. Acquisitions have helped the company expand its product portfolio, enabling it to enter the cloud computing business, catering to customers across all segments of the IT market. The company is cash-rich. However, we are a bit concerned about the intense competition in the software & cloud computing space from big players.
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