Micromuse buy will give IBM VoIP tech edge

IBM Corp. has agreed to buy network management software vendor Micromuse Inc. for US$865 million in cash, the companies announced Wednesday.

IBM said the move would allow it to offer its customers better technology for dealing with increasingly mixed traffic in their networks produced by VOIP (voice over Internet Protocol) and other online voice and video services.

The companies hope to close the deal in the first quarter next year subject to approval from Micromuse shareholders and U.S. regulators, they said.

IBM has offered $10 for each Micromuse share, almost 40 percent above its closing price on Tuesday of $7.21. In early trading Wednesday, Micromuse stock (ticker symbol: MUSE) jumped more than 35 percent to reach $9.84.

IBM plans to add Micromuse’s technology to its line-up of Tivoli management software to help companies better manage services such as videoconferencing for remote workers or streamed music for cell phone customers, it said.

The rise of VOIP and video-on-demand traffic is making networks more complex and organizations need real-time network and service management capabilities, according to IBM. Micromuse’s products can also diagnose and fix network outages and performance problems, it said.

Based in San Francisco, the company has about 1,800 customers, including America Online Inc., British Telecommunications PLC, Deutsche Telecom AG, Fidelity Investments Services Ltd. and the U.S. Securities and Exchange Commission.

Its revenue for the fiscal year ended September 2005 grew 10 percent to $160.8 million. Net losses were $3.8 million based on generally accepted accounting principles (GAAP), compared with net income of $4.4 million in fiscal 2004. Micromuse projected that revenue would grow to between $195 million and $200 million for fiscal 2006. It did not forecast GAAP income.

If the deal is approved Micromuse will become a business unit in IBM’s Tivoli division. The companies have about 500 joint customers, IBM said.

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