The San Jose, California-based company looked set to benefit from the convergence of system and security management after its $255 million purchase of PentaSafe Security Technologies and the $23 million acquisition of Marshal Software in 2003, which added a security focus to its existing systems management technologies.
Things have not quite gone to plan so far this year, however, with the company suffering a revenue dip. For the first quarter the company recorded revenues of $62.9 million, down 18.5% on the same quarter last year. That was followed in the second and third quarters with revenues of $64.0 million and $67.0 million respectively, down 20.4% and 16.5% on last years figures.
Recently appointed vice president and general manager for Europe, David Qauntrell conceded that the company has had execution problems but maintained that it is now getting on top of them.
The operational performance of the company is not what we need it to be, he said. In a situation like that you have two choices, either cut the business or look at the strategy and operations.
The company has elected to do the latter and Quantrell believes it has now identified the problems. I don’t think we integrated the business fast enough, he said. I don’t think we’ve been as focused on key clients as we need to be.
Quantrell said the company had taken steps to focus its staff around key customers and was being clearer about communicating its product and strategy plans with partners and customers. He said these changes were already having an impact on the business and will influence an upturn in top-line performance over the next 12 months. A lot of that now is getting together as one functioning entity and getting a clear line of sight of the customer, he said.
NetIQ’s position to some extent indicates that mergers and acquisitions can cause not only problems in terms of technology overlap, but also in terms of strategy and execution focus. Certainly the acquisitions of PentaSafe and Marshal caused it few of the former.
The core challenges around integration were not particularly vast as there wasn’t a huge amount of overlap, said Luke Brown, NetIQ security director EMEA. So the key challenge was to take the component parts of PentaSafe and integrate them into the single NetIQ security management product.
That has been done with the recent launch of Security Manager 5.0 for incident and event management, threat analysis and log analysis, as well as Vulnerability Manager 5.0 for host-based intrusion-detection, auto-discovery and patch management, among other things.
Combining NetIQ’s existing systems and performance-management technologies and WebTrends analytics technologies gives NetIQ the ability to cover the three pillars of managing risk, controlling risk and compliance, according to Brown.
What we have is the ability to approach the market differently, he said, conceding, we haven’t done a good job of getting that message out. The company will be looking to do that as it tries to exploit the security and management issues presented by risk management and regulatory compliance.
It’s a huge opportunity and a huge focus for the company over the next year and beyond, said Quantrell. It’s driven by a pure business driver. We are seeing clear opportunities, he added of the company’s potential for improvement as a whole. There is no lack of opportunities even in our existing client base.
