IBM buys management SW co

NEW YORK: IBM agreed to acquire privately held Candle Corporation for an undisclosed amount to boost its offering of management software for data centers, said the world's largest computer company.

International Business Machines Corp., based in Armonk, New York, said Candle's software and tools help manage data centers, particularly giant mainframe computers. Candle's software also helps manage other large server computers.

This is IBM's second small software acquisition this year, IBM software head Steve Mills said, pointing to its planned purchase of privately held Trigo announced in early March. IBM expects to close the Candle deal in the second quarter.

"Having done some 30 acquisitions since 1995, clearly it's part of our menu of approaches to growing our business," Mills said. Mills declined to comment on financial details, such as Candle's revenue.

According to Hoover's Online, the company had revenue of $320 million in 2001, the most recent figure available.

Candle, based in El Segundo, California, said it has 3,000 customers and 800 employees. It competes with BMC Software Inc., which had a revenue of $1.3 billion in fiscal 2003.

BMC spokesman, Arch Currid said that BMC will continue to compete with Candle after it is acquired by IBM, saying that BMC has been targeting Candle customers during the past two years. "We're committed to mainframe, we're continuing to invest heavily in it," Currid said.

Mainframes, while having a reputation of being yesterday's technology, are still a large part of IBM's business. Computer hardware totaled $9 billion in IBM's fourth quarter, of which $5 billion came from its computer systems group, which includes mainframes and other large computer servers.

In addition, sales of mainframes drive IBM's other businesses, such as computer services and software.

Software that manages technology systems such as computers or networks is expected to be the top area this year in software mergers and acquisitions, said Paul Crisci, Managing Director at Broadview International in its West Coast mergers and acquisition office, which advised Candle.

"That is a very hot category within the enterprise software arena," Crisci said, pointing towards acquisitions that IBM competitors Hewlett-Packard Co., EMC Corp. and Sun Microsystems Inc. have made.

IBM said the Candle acquisition would help it strengthen its on-demand products, in which companies pay for only as much computing power as they need. IBM currently offers system management software through its Tivoli brand.

(Additional reporting by Julie MacIntosh)

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