Combination to yield more powerful Performance Management Solutions
and immediate return on current investments for both customers and
shareholders
WESTFORD, Mass.--NetScout Systems, Inc. (NASDAQ: NTCT), an industry pacesetter for
advanced network and service assurance solutions, today announced that
it has entered into a definitive agreement to acquire Network General
Corporation, in a combined cash, stock, and debt transaction currently
valued at approximately $205 million. The acquisition, subject to
customary closing conditions and regulatory approvals, is expected to be
completed by early November. Network General employees will become
NetScout employees, and the newly combined entity will be headquartered
in Westford, Massachusetts.
NetScout believes that for the full year of fiscal 2009 the combined
company will approximately double NetScout’s
current revenue rate, and that the transaction will be accretive for
fiscal year 2009 on a non-GAAP basis and accretive on a GAAP basis by
the end of fiscal 2009. The combined company will have a larger and more
diversified customer base supported by a larger sales force and a
planned doubling of R&D spending. Faster revenue growth is expected to
be achieved through a broader, integrated product portfolio which will
provide customers greater efficiency and value. It is anticipated that
there will be significant cost savings realized across the combined
company, improving operating margins and earnings per share.
The acquisition furthers NetScout’s vision of
providing superior network-based performance management based on a KPI
(key performance indicator)/Flow/Packet paradigm. The new, extended
portfolio will directly benefit both customer sets by increasing the
value of the NetScout solutions available to them while protecting their
existing investments. NetScout customers will benefit from the addition
of best-of-breed expert packet analysis and data mining, and Network
General customers will benefit from best-of-breed real-time monitoring
and rapid top-down troubleshooting. For all customers, this will
translate into meaningful reductions in their MTTR (mean time to
restore) metrics, while reducing the training and skills required to
manage complex network-based operations.
“Today, we are bringing together two
established companies with complementary technologies to form a new
stronger organization that will have the scale, technology, and
mindshare to meet some of the greatest challenges associated with
virtualization, convergence, SOA and highly distributed network-centric
operations,” said Anil Singhal, President and
CEO of NetScout Systems. “We are thrilled by
the opportunity now before us to elevate and advance the state of the
art in packet-flow performance management solutions. This combination
positions us to substantially expand our ability to help the largest
organizations worldwide to assure that network-enabled applications and
services can reliably be delivered to diverse and geographically
extensive operations,” continued Mr. Singhal.
The acquisition will accelerate NetScout’s
recently announced entry into the Wireless Service Provider segment.
This segment is currently dominated by several large competitors, whose
solutions have relied on deep packet analysis versus NetScout’s
superior real time monitoring and reporting. With the addition of
Network General’s leading technology,
NetScout will be able to offer the best solution across a broad spectrum
of performance monitoring and troubleshooting requirements.
“There has been a great degree of common
vision between the two companies which will promote accelerated product
integration and continuation of our focus on technology leadership and
support for our customers,” said Bill Gibson,
CEO of Network General “We believe that the
combination of our two talented employee teams has tremendous potential
to shape the future of the IT and service provider markets.”
“We have long believed in the potential of
packet-flow technology. This combination will accelerate our ambition to
propel these solutions into their destined role as critical components
of tomorrow’s service-centric operating
environments,” said Ken Hao, on behalf of
Silver Lake and TPG. “The resulting
organization will be an agile and dynamic technology leader, in which we
are thrilled to become stakeholders.”
“This combination should prove to be very
good news for organizations that are struggling to assure IT services in
the face of the constant onslaught of new applications and technologies,”
said Dennis Drogseth, Vice President, Enterprise Management Associates. “Most
recent consolidations in the network management sector and the
strategies employed by the major networking and software technology
providers have largely been designed to broaden product portfolios and
span a wider range of customer needs. This trend highlights the
importance of network management and sets the stage for the next step:
combining the resources and market access of the best of breed solutions
in the packet/flow segment to deliver compelling solutions to the set of
operational challenges that have thus far eluded the big five. NetScout’s
acquisition of Network General lays a powerful and cohesive foundation
for assuring application service reliability across the distributed
network environment – a complex and
multi-domain requirement that EMA believes will demand accelerated
attention as application designs become more modular and more
network-dependent.”
Transaction details:
NetScout is making the acquisition, valued at approximately $205 million
(based on the closing price of NetScout common stock on September 19,
2007), with a combination of six million shares of NetScout stock, $50
million of cash and $100 million of debt financing. NetScout anticipates
obtaining the debt financing either from affiliates of Silver Lake and
TPG or from third party financing sources. After completion of the
acquisition, Silver Lake and TPG will become NetScout shareholders and
representatives of Silver Lake and TPG are expected to join the NetScout
Board. The transaction is slated to close in early November subject to
customary closing conditions and regulatory approvals.
Conference Call and Webcast: NetScout Systems will host a
conference call today at 9:00 a.m. ET, which will be webcast live
through the Company's website at http://www.netscout.com/investors.
Alternatively, people can listen to the call by dialing 866-701-8242 for
U.S./Canada and 706-634-5113 for international callers and using
conference ID: 17348240. A replay of the call will be available after
11:00 a.m. ET on Sept. 20 for two weeks. The number for the replay is
800-642-1687 for U.S./Canada and 706-645-9291 for international callers.
The conference ID is: 17348240.
About NetScout Systems
NetScout Systems, Inc. (NASDAQ: NTCT) has been the industry pacesetter
for advanced network and service assurance solutions for over a decade,
and counts the world’s largest enterprises,
government agencies, and service providers among its customers.
Enterprise and government IT organizations deploy NetScout's nGenius®
Performance Management System to increase service levels to their users
by reducing or preventing service disruptions. Service providers depend
on NetScout’s proven IP performance
management technology and expertise to protect the quality of their
customers’ experience with IP-based services.
NetScout is headquartered in Westford, Massachusetts and has offices
worldwide. Further information is available at http://www.netscout.com.
About Network General Corporation
Network General™, a privately held company
based in San Jose, California, is a leading provider of IT management
solutions designed to integrate and simplify troubleshooting and
management across IT domains, assuring the delivery of IT services. The
Network General portfolio consists of innovative software solutions and
intelligent appliances that proactively monitor and manage all elements
of IT infrastructure performance including network devices,
applications, and servers, while simultaneously delivering a correlated
view of the health of the business service. Network General’s
solutions drive down the cost-per-managed network segment while
providing IT professionals with a full range of complementary products
that assure delivery of business-relevant IT services.
Safe Harbor:
Forward-looking statements in this release are made pursuant to the safe
harbor provisions of Section 21E of the Securities Exchange Act of 1934
and other federal securities laws. Investors are cautioned that
statements in this press release, which are not strictly historical
statements, including the plans, objectives and future financial
performance of NetScout, constitute forward-looking statements which
involve risks and uncertainties. Actual results could differ materially
from the forward-looking statements. Risks and uncertainties which could
cause actual results to differ include, without limitation, risks and
uncertainties associated with the satisfaction of the applicable closing
conditions and receipt of regulatory approvals for the acquisition, the
Company's ability to integrate the acquisition successfully, costs
associated with the acquisition, the ability to
achieve market introduction and acceptance of new
products from the acquisition, difficulties in managing geographically
dispersed operations, and other factors relating to acquisitions
generally, as well as the Company’s
relationships with strategic partners, dependence upon broad-based
acceptance of the Company’s network
performance management solutions, the Company’s
ability to achieve and maintain a high rate of growth, introduction and
market acceptance of new products and product enhancements, the ability
of the Company to take advantage of service provider opportunities,
competitive pricing pressures, reliance on sole source suppliers,
successful expansion and management of direct and indirect distribution
channels and dependence on proprietary technology, and risks of
slowdowns or downturns in economic conditions generally and in the
market for network performance management solutions specifically. For a
more detailed description of the risk factors associated with the
Company, please refer to the Company’s Annual
Report on Form 10-K for the fiscal year ended March 31, 2007 and
Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 on
file with the Securities and Exchange Commission. NetScout assumes no
obligation to update any forward-looking information contained in this
press release or with respect to the announcements described herein.
NetScout and the NetScout logo and nGenius are registered
trademarks of NetScout Systems, Inc. The CDM logo, MasterCare,
Progressive Analytics and the MasterCare logo, are trademarks of
NetScout Systems, Inc. Other brands, product names and trademarks are
property of their respective owners. NetScout reserves the right, at its
sole discretion, to make changes at any time in its technical
information and specifications, and service and support programs.
Network General, Business Container, networkDNA, and the Network General
logo are registered trademarks or trademarks of Network General
Corporation and/or its affiliates in the United States and/or other
countries. Only Network General Corporation makes Sniffer®
brand products. All other registered and unregistered trademarks herein
are the sole property of their respective owners. ©2006
NETWORK GENERAL CORPORATION. ALL RIGHTS RESERVED
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