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OSS

CA Makes Wily Acquisition

CA Technologies (Nasdaq: CA) is bolstering its OSS capabilities with the $375 million all-cash acquisition of applications management software vendor Wily Technology Inc. . (See CA to Buy Wily for $375M).

While more focused on the large enterprise space -- where it has many of the leading names in financial services, retail, healthcare, manufacturing and media, as well as governments, among its long list of customers -- Wily boasts a number of major telecom operators as users, including AT&T Inc. (NYSE: T), Cingular Wireless , Orange SA (London/Paris: OGE), Sprint Corp. (NYSE: S), Telstra Corp. Ltd. (ASX: TLS; NZK: TLS), and Verizon Communications Inc. (NYSE: VZ).

The Wily acquisition will bolster CA's capabilities, especially in the Web applications management sector, as it chases carrier business -- a stated aim of the company following its $350 million acquisition of Concord Communications last April (See CA Targets Telcos With OSS and CA Grabs Concord.)

CA expects the deal to close within three months, and for Wily to contribute $75 million in revenues in its fiscal year 2007 beginning April 1, 2006. CA also expects the acquisition to negatively impact earnings in the current financial year, but be neutral to earnings in the 2007 fiscal year.

CA's share price barely budged on the news, dipping just 2 cents to $28.30.

The acquisition provides a good return for Wily's investors, who had backed the company to the tune of about $60 million since the company was formed in 1998. Investors include Accel Partners , Focus Ventures , and Greylock Partners .

The $375 million price tag represents a "nice premium" for those investors, says OSS Observer analyst Patrick Kelly in an email to Light Reading. But he's not convinced that CA has what it takes for the telecom operator OSS market.

"I think CA is still dabbling in telecom and does not have a well thought out plan to get its share of investments," reckons the analyst. He says CA's proposition to carriers "lacks substance," and that there's no evidence CA has managed to build on the carrier customer base it acquired with the Concord acquisition.

Kelly believes adding Wily to its software arsenal will likely attract more business from IT services players looking to provide managed services and hosted solutions to enterprise customers rather than any meaningful tranche of traditional telecom OSS business.

CA isn't the only big IT services name trying to strengthen its position in the software products space. One of its major competitors, IBM Corp. (NYSE: IBM) has made a major push into the telecom sector in the past year, most notably and recently with its $865 million acquisition of Micromuse Inc. (Nasdaq: MUSE). (See IBM Tiptoes to Telecom With Micromuse.)

— Ray Le Maistre, International News Editor, Light Reading

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