Avocent prepares to acquire LANDesk 28 August, 2006 By Dave Chappelle

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At his keynote address to Interchange, Avocent CEO John Cooper wanted to make one statement very clear:

"There will be no disruptions to LANDesk."

Before the announcement of the acquisition, before a negotiated a price, people began asking, "Why would a hardware company buy a software company?"

"The only reason you should buy a business is to get capabilities you don't have," said Cooper. "Otherwise, keep your money."

"When you buy a company you need to be very careful to get what you pay for. In technology, it's always the people. Our first priority coming form the pocketbook as well as the heart: Avocent is fully committed to growing the LANDesk business. It's a business that has rapid growth path in front of it. IT should not be disrupted. Over time we will focus on finding areas where we can combine our strengths."

Avocent had determined that embedded KVM could be a real threat to its business. Unlike other firms that have been content to play the role of ostrich which technology changed the industry, the company concluded that it would be a mistake to refuse to participate in the business that could threaten it, and that if anyone should be in the KVM business it should be itself.

"No one was better equipped; if someone was going to eat their young, it needed to be us," Cooper said.

"LANDesk has always been the best. It was clearly the easiest to use. It was the most integrated and had been built by one group of people, not cobbled together like so many others. Most importantly, it has a core group that has been able to stay together and function together thru three ownerships. We did not have a single problem or find a single inconsistency when performing our due diligence. That confirmed it was a culture of people."

According to its decision makers, Avocent does not have the capability to integrate LANDesk, expects it to continue to exist as a separate unit, and to continue to grow.

"There's nothing at stake here except my career and about half a billion dollars," said Cooper. "The board and execs aren't as sold on my career, but they are on that half a billion."

The plan is to leverage the two companies to change the paradigm of IT management by providing real solutions that improve processes, control costs, and increase customer competitiveness.

"It's very rare have two companies that mesh together as well as ours do going forward, that have not competed looking backward," said Cooper.

The acquisition will likely mean good things for the channel, in a couple of ways.

"Our goal is to help the reseller make the sale, and to profit in any case where they can provide logistics or services. We get very involved with resellers; most of our leads come form resellers, and we are very high touch."

LANDesk was always direct touch, but Avocent has been more focused on using the channel to do the touching. Both firms want exposure to all of the channel, and will structure things to all products that make sense.

"We plan to use our data center channel to go to desktops, and desktops into the data centric channel so that all channels sell more," said Cooper.

"One of our goals is to educate and enable the different channels to sell all of the product lines and be able to increase their potential for having a relationship with us. At the same time we'll become more meaningful and profitable to them, and our investment in them becomes more profitable for us."

Both corporate cultures are ware that good channel relationships require both sides to invest not just money, but also training and time; and to negotiate and facilitate.

"We have about five per cent overlap going into the acquisition," said Steve Daly, senior vice president, corporate strategy, Avocent.

"Usually when I read an acquisition announcement overlap is 90 per cent, which doesn't make a lot of sense unless you're tying to consolidate. Our pure reasons are much different; to go where we haven't before. There's a huge opportunity to cross-sell."

The transaction is expected to close this week, and the firms have already begun low-level integration. But it will be late second quarter 07 before we see integrated products. There will be a lot of reseller and internal training as the two firms equip themselves to go in the direction they want.

"I'm sure there's apprehension on part of LANDesk folks, because things will change," Cooper said.

"We've spend a good bit of time in the fall to make sure people have what they need; for example we've already changed two holidays to accommodate different cultures. We've done whatever we can to allay those apprehensions. There's a level of anticipation that overrules that apprehension."

Some armchair observers were critical of Avocent for paying a large price for LANDesk, instead of going after a smaller firm that could have been purchased for much less.

"There's a reason you pay four and half times revenue instead of one and a half times," said Cooper.

"If it's strategic and important to your long term strategy, it has to be important to what you want done. Other companies haven't demonstrated that. The deal came down to what they were worth, and what they would be worth once they've finished doing a few things."