Compuware Acquires Gomez

Compuware Corp. (CPWR - Analyst Report) yesterday announced that it will acquire privately-held Gomez Inc. for $295 million in cash. The acquisition is expected to be completed by November and dilute fiscal 2010 EPS due to an amortization charge of $5 million per quarter. Management expects to see a positive impact on 2011 results.
 
Headquartered in Detroit, Michigan, Compuware provides software products and professional services to many of the largest users of information systems in the world. Headquartered in Lexington, Massachusetts, Gomez is a leader in web application experience management and its clients include Google and Facebook. Gomez employs 272 people around the world. Compuware plans to retain all of them after the close of the transaction.
 
Compuware as well as Gomex provides unified application performance management solution. Management added that while other players have fragmented solutions, only Compuware and Gomez can optimize application performance across the enterprise and the Internet.
 
Gomez delivers its offering through a Software as a Service (SaaS) model and the addition of this to Compuware’s SaaS revenues will further strengthen the latter’s model. SaaS continues to gain traction due to lower cost of ownership and faster, easier adoption and maintenance. 

We think the deal will expand Compuware’s product portfolio and increase its competitiveness. The services are very competitive and fragmented partly due to low barriers to entry. 

Compuware competes with more than 40 firms in one or more of its offerings. Its rivals include BMC Software, Borland Software, Computer Associates, IBM (IBM - Analyst Report) and Mercury Interactive. Some of these firms have significantly greater financial and marketing resources. The acquisition will also make good use of Compuware’s cash balance of $390.7 million in the June quarter.