CA Technologies Completes $480M Rally Software Buyout - Analyst Blog
CA Technologies CA recently announced that it has completed the acquisition of Rally Software Development Corp. The two companies entered into a definitive agreement in late May this year, under which CA Technologies agreed to buy Rally Software in an all cash deal worth approximately $480 million or $19.50 per share.
Boulder-based Rally Software is a global provider of software and services. Its solutions help companies to speed up innovation, improve performance and respond effectively to the evolving competitive market and customer needs. Rally's SaaS platform facilitates companies to manage their software development lifecycle by aligning it with strategic business objectives.
It is to be noted that Rally Software is a global leader in the Agile software development space. Agile software development refers to a group of methodologies under which requirements and solutions develop through close collaboration between self-organizing, cross-functional teams.
During fiscal 2015, Rally Software generated total revenue of $88 million and had nearly 500 employees across four continents. The company has operations in more than 135 countries and serves every industry. Additionally, it lists over 35 Fortune 100 companies as its customers.
Therefore, the acquisition will broaden CA Technologies’ portfolio and enable it to better serve its patrons. Apart from this, we believe the company will get a larger customer base which will boost its top-line and bottom-line performance. As announced earlier, Rally Software will be integrated into CA’s DevOps and Management Cloud business.
CA Technologies CEO, Mike Gregoire, believes that “software applications are changing the world, disrupting established business models and bringing in completely new experiences in areas from travel to banking. In order to compete, businesses need to develop high quality software quickly and reliably”.
We consider that with enhanced capabilities which come from the acquisition of Rally Software, CA Technologies will be able to strongly compete with other industry rivals like International Business Machines IBM and Oracle Corp. ORCL.
We remain encouraged by CA Technologies’ acquisition strategy, which has enhanced its IT management, software and services portfolio. Moreover, we believe that the breadth of its products and the increased efficiency offered by them will attract customers across sectors, lending stability to its business model.
Nevertheless, CA Technologies’ near-term prospects do not appear impressive. In fourth-quarter fiscal 2015, the top line declined 5.6% year over year primarily due to unfavorable foreign exchange impact. Anticipating unfavorable exchange rates to continue impacting its financial results, the company also provided a tepid revenue outlook for fiscal 2016.
Currently, CA Technologies carries a Zacks Rank #4 (Sell). A better-ranked stock in the same sector is OptimizeRx Corporation OPRX, sporting a Zacks Rank #1 (Strong Buy).
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