WAN Optimization getting Hot
The number of competitors left standing gets smaller, WAN Optimization heats up. In the current market economy technologies that save money, very tangibly will most likely do well- WAN Optmization, Data De-Duplication, etc have a nice outlook. Gaining market share in downturned economic climates is often a good strategy as you can gain footprint and the business is well poised during the regression to the growth mean over time.dgNEW YORK (Dow Jones)–Blue Coat Systems Inc. (BCSI) agreed to acquire Packeteer Inc. (PKTR) in a $268 million all-cash deal that will augment Blue Coat’s ability to speed the flow of corporate network traffic.The purchase will allow Blue Coat, Sunnyvale, Calif., which provides equipment and software that helps its corporate customers better manage and protect their networks, to add Packeteer’s technology to its product portfolio. The company sees the deal strengthening its standing in the wide area network optimization market, a lucrative segment that deals with helping remote workers connect to their company’s networks faster.”We took a broader view of the WAN optimization market and found profound changes taking place,” said Brian NeSmith, president and chief executive of Blue Coat.As companies strive to increase the efficiency and productivity, the business of boosting network speeds has become an attractive one. In particular, Packeteer, Cupertino, Calif., specializes in improving the performance for users who connect to the corporate infrastructure remotely through a virtual private network – an increasing trend as more workers go mobile.But in the past year, Packeteer’s business has cooled down, with 2007 sales dipping slightly over the year-earlier period. Rival Riverbed Technology Inc. (RVBD), meanwhile, more than doubled its revenue in the same period.Blue Coat is hoping Packeteer’s technology will allow it to break free from a cutthroat pack of WAN optimization providers that includes Riverbed and networking titan Cisco Systems Inc. (CSCO).”(The deal) differentiates us from more vanilla operations purely focused on WAN optimization,” NeSmith said in an interview with Dow Jones Newswires, taking a veiled shot at Riverbed’s sole focus on WAN optimization.Blue Coat’s offer to pay $7.10 a share in cash represents a 15% premium over Packeteer’s Friday closing price of $6.18. Packeteer recently traded at $6.98, up 13%, or 80 cents. Blue Coat fell 3%, or 57 cents, to $19.18.The deal is expected to contribute to earnings in the fiscal second quarter, excluding one-time costs related to the acquisition.Blue Coat already has a WAN optimization business, and NeSmith said job reductions and other merger-related cuts would occur. He didn’t provide any more specific information.NeSmith acknowledged Packeteer’s recent problems, noting that the company didn’t invest in its core products and failed to make a dent in the newer segments of the market.Packeteer plans to “reinvigorate” its product line and “bring a discipline of execution that will work more effectively than what they had,” he said.In swooping in and buying Packeteer, Blue Coat side-stepped Elliot Associates LP, which was also interested in the company. Elliott Associates previously offered to buy Packeteer for $5.50 a share in cash, or $190 million.Blue Coat agreed to issue $80 million of zero coupon convertible notes in a private placement to Francisco Partners II LP, an associate of Elliot. Elliot, meanwhile, will terminate its tender offer and sell its 9.9% interest in Packeteer to Blue Coat, the company said.