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Micromuse Closes Quallaby Buy

Micromuse has completed its acquisition of performance management software vendor REVISED 6/3

June 2, 2005

3 Min Read

LONDON -- Micromuse Inc. (Nasdaq: MUSE), the leading provider of ultra-scalable, realtime business and service assurance software today announced that it has completed its acquisition of Quallaby Corporation. Quallaby’s PROVISO® performance management software is now included within Micromuse’s Netcool® product suite and is available immediately as the Netcool®/Proviso® product family. As an integral, highly scalable component of the Netcool suite, Netcool/Proviso enhances the ability of organisations worldwide to manage their complex infrastructures and deliver powerful, next-generation services over converged IP networks.

“The large tier 1 CSPs in North America and Europe are consolidating network management and OSS systems across the board to reduce operational cost and remove some of the burden in managing next generation services,” according to Patrick Kelly, co-founder and analyst at OSS Observer. “Micromuse is in a much better position now with its acquisition of Quallaby complete to benefit from the OSS consolidation trend. It combines two key components within the service assurance segment to support much larger initiatives in the service management arena which focus on supporting business initiatives and customer experience.”

“Micromuse's Netcool/Proviso realtime fault and performance management technology provides a scalable, flexible and broadly integrated architecture that enables a powerful 'manager-of-managers' platform for analysing fault and performance data no matter where it resides within a large, complex network,” said Lloyd Carney, Micromuse chairman and CEO. “Our plan for tightly integrating the Proviso product within the Netcool suite leverages the strengths of both product sets with a goal of new revenue opportunities for Micromuse as well as significant value to our customers.”

On April 8, 2005, Micromuse announced a definitive agreement to acquire Quallaby Corporation, a privately-held software company based in Lowell, Massachusetts for $33 million in cash and the assumption of employee stock options covering approximately 1.6 million Micromuse shares. Micromuse and Quallaby have been alliance partners for several years and many common customers already appreciate the value of an integrated service assurance platform.

The former Quallaby product team will become an integral development unit within the Micromuse product delivery organisation that will remain focused on the Netcool/Proviso software. Sales, marketing and general administration functions will be merged with existing Micromuse departments.

Micromuse expects the transaction to be up to $0.02 dilutive to non-GAAP earnings per share for the current quarter, but non-GAAP earnings per share neutral for fiscal year 2005. The transaction is expected to be accretive to GAAP and non-GAAP earnings per share for fiscal year 2006. Non-GAAP earnings per share excludes certain non-cash, non-recurring or acquisition-related charges, such as in-process research and development write-off, amortisation of intangible assets, deferred stock-based compensation expense, restructuring charges and other non-recurring items.

Micromuse's guidance as to the expected impact that the acquisition will have on Micromuse's earnings per share is only provided on a non-GAAP basis. It is not feasible to provide the expected impact that the acquisition will have on a GAAP basis because the items excluded are difficult to predict and estimate and are primarily dependent on future events, such as the determination of the portion of the purchase price attributable to in-process research and development write-off and to identifiable intangible assets and the amortisation thereof, calculation of deferred stock-based compensation expense and decisions concerning the location and timing of facility consolidations.

Micromuse Inc.

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