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BMC software has announced the acquisition of application release automation provider VaraLogix for an undisclosed amount. This acquisition is expected to help BMC expand its DevOps portfolio, which is a tool for IT professionals. 

The resultant enhancement to the DevOps portfolio is expected to increase the efficiency, accuracy and speed of application development, which in turn would help IT professionals improve the ROI for their companies. These advantages should help the adoption of the technology and therefore convert to higher revenue for BMC.

The increasing volumes of software applications and their updates are leading to new capabilities that could help companies stay ahead in the race. However, companies generally treat the installation of new applications cautiously, since any mistakes could prove to be costly.

The acquisition is useful in this regard, as the collaboration of the technologies of BMC and VaraLogix creates an abstraction layer that enables IT teams to deploy applications even without prior programming experience. It therefore also addresses the need for advanced application specialists in the installation process.

Although competition is gradually intensifying in the SaaS space, BMC’s focus on its Service segment has enabled it to regain some market share. This apart, the BMC RemedyForce is gaining momentum and is expected to generate additional revenue. Again this acquisition is expected to affect the service business in a positive way.

Moreover, the company is slowly expanding its customer base both on account of market expansion and at the expense of competitors. On the other hand, rationalization of expenditure by different government and private customers may weigh on the overall business volumes of the company. The current economic turmoil may also affect the business going forward.

The company witnessed growth in most of its business segments and generated decent cash flow in the first quarter of 2013. However, we are a bit apprehensive about the bleak business conditions in Europe. Moreover, growing competition from big players such as IBM Inc. (IBM - Analyst Report), Hewlett-Packard Company (HPQ - Analyst Report), EMC Corp. (EMC - Analyst Report) and CA Inc. (CA - Analyst Report) is a challenge for the company.

The company carries a Zacks #3 Rank, implying a short-term Hold rating.

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