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CA has Cheyenne in its sights

CA has Cheyenne in its sights

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Computer Associates is planning to buy Cheyenne for $US1.2 billion, according to a CA spokesman. Industry observers view the planned acquisition as a positive move for CA, which is hoping to bolster its position in the indirect sales channel and the desktop market by taking advantage of Cheyenne's security and storage technology.

Though a tender has not yet been made, a wholly-owned subsidiary will offer to purchase all outstanding shares of Cheyenne's common stock for $US30.50 per share, company sources said. CA will fund the merger, which has been unanimously approved by both companies' boards of directors, through cash balances and existing credit facilities.

Cheyenne represents an attractive proposition for CA, according to Gary Mitchell, general manager operations CA. "There is an existing synergy between the two companies," he said.

Mitchell cited complementary products, technology and business partners as clear benefits to the move, pointing specifically to CA's intention to bolster its enterprise management solution, Unicenter, by incorporating Cheyenne's Arcserve storage management software.

Cheyenne's experience in the indirect sales channel, according to Mitchell, is one of the storage management software company's major attractions for enterprise management giant CA.

At present, CA primarily conducts its sales directly, whereas 95 per cent of Cheyenne's sales come through indirect channels, Mitchell said. "This will aid our push into third party channels, whereby we hope to be 50 per cent direct and 50 per cent indirect within five years," he said.

One observer said CA's purchase of Cheyenne made good sense, given CA's sales-channel goal.

"It's hard to [reach that goal] without buying the channel, and I think today [Wang] bought the channel," said Jon Oltsik, an analyst with Forrester Research Group.

According to Mitchell, Cheyenne will function as a division of CA, and will remain under the direction of Cheyenne managing director ReiJane Huai. CA will retain all Cheyenne employees and will not build any new facilities as a result of the merger, he added.

"Cheyenne was not shopping the company, but when a reasonable offer is presented to the board, the board has a fiduciary responsibility to consider it," Huai said.

Forrester's Oltsik said the $US1.2 billion price tag was fair, given Cheyenne's strong record of profitability over the last few years. "It's a lot of money but it's not out of the ballpark," Oltsik said.


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