Magic will be maintained as its own business unit within Remedy (which is owned by BMC) and around 20 staff will be making the transfer from Network Associates whilst remaining in their Plano, Texas offices. Thus, in much the same way as BMC picked Remedy out of Peregrine Systems, Magic will maintain its autonomy but strive to become a part of the bigger Remedy picture.
Much as Network Associates has tried to position the Magic products into the enterprise space, it has never quite made the grade.
For Remedy, its service desk application is usually overkill in the SMB space and can't compete on price. With this acquisition, it seems that the focus will be on the management of growth paths that allow Magic users to evolve into a Remedy solution as the need arises.
Remedy puts this into perspective by evaluating the business opportunities that will arise from the acquisition. Key to this rationale is the ability of Remedy to reach down into the SMB market and acquire customers at an earlier stage in their development. The addition of Magic's 4000 customers is also expected to increase its share of the market for service desk products to 30 percent.
In return, Remedy will be able to apply its enormous experience of IT Service Management best practice to the Magic Solutions products to come up with a much stronger offering in the future.
Remedy also has an eye on the value it delivers to its shareholders and, in that respect, this seems to be a good deal. With Magic Solutions generating 5 million in revenue during FY2002 and showing very significant growth of around 26 percent in achieving those figures, it appears that Remedy has a real bargain. It has paid less than a year's revenues and will expect to recognise earnings from the acquisition as soon as it closes in February 2004.
The parent company, BMC, has a reputation for being acquisitive but it has shown recently that it can be very astute at the same time. Remedy was something of a steal from Peregrine and now it appears to have repeated the manoeuvre by extracting Magic from Network Associates where it was somewhat out of line with the other products.
We will have to wait and see whether this is simply an acquisition of market share or whether the broader business strategy comes to pass.
