Acquisition Will Likely Lead to a Large Footprint in the Windows Market

Quest Software, which provides database, application, and Windows-management solutions, recently announced its plans to acquire ScriptLogic, a provider of system-management solutions for Windows networks. Scott Davidson, the vice president, treasurer, and head of investor relations at Quest, reveals that there are several reasons why Quest is spending approximately $90 million to acquire ScriptLogic. First and foremost is Quest's desire to expand its product footprint in the Windows desktop market.

"Most of the growth that we've seen across our Quest businesses in the last couple of years has been predicated in the Windows space as a whole. A large part of that has been focused on products on the server side. Up to this point, we really haven't had much of a product footprint in the desktop market. We have one product that manages desktops through Group Policy, but it hasn't really been a focus for us in the past," said Davidson. But that will no longer be the case when Quest acquires ScriptLogic because more than 19,000 customers are currently using ScriptLogic products to manage about 4.75 million desktops.

The acquisition of ScriptLogic will expand Quest's presence not only in the desktop market but also the small-to-midsized business (SMB) space, according to Davidson. "From the perspective of feature functionality and depth of solution, most of Quest's products in the Windows space are geared toward enterprises. The customers that ScriptLogic has been typically targeting with its product set are the small to medium size businesses."

Market expansion isn't the sole driving force behind the acquisition. From a financial perspective, Davidson notes that, "ScriptLogic is a nice, stable, growing business that's profitable." In addition, the acquisition gives Quest the opportunity to try a new sales model. "Quest has historically been driven by direct sales with the customer. Although we do some business through channel partners, such as Dell, we historically haven't had much of a revenue stream attached to a traditional two-tier distribution environment," said Davidson. "The acquisition will give Quest a new opportunity for distribution beyond the direct sales model."

Because Quest is planning to run ScriptLogic as a wholly owned subsidiary, the management team that's currently in place at ScriptLogic will remain. "They'll report to Quest," said Davidson. "Obviously, we'll have a management team at Quest that interacts with them, but they'll still be responsible for the same things that they do today."

Similarly, ScriptLogic will keep its autonomy in regard to customer support and engineering. "When ScriptLogic customers have an issue in which they need support, they'll still go through ScriptLogic, as they do today. There won't be any change." And the same engineering group that has developed products for ScriptLogic over the years will continue to do so. "They have a whole list of ideas for things that their SMB customers are asking for." And since ScriptLogic doesn't have too big of footprint outside the United States, expanding their product line worldwide is a huge opportunity. "The people at ScriptLogic are really fired up to be able to expand their brand and their products through Quest," says Davidson.

Assuming that all the legal and regulatory approvals are given, Quest's acquisition of ScriptLogic is expected to be completed in the third quarter 2007. That gives competitors, especially those companies that offer desktop solutions to SMBs in other parts of the world, a few months to prepare.

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