Avocent Restructures, Announces Acquisitions - InformationWeek

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Avocent Restructures, Announces Acquisitions

The acquisitions will bring Avocent into closer competition with full-spectrum IT infrastructure management vendors, such as IBM and HP.

Restructuring systems integrator and networking equipment Avocent announced two acquisitions valued at more than $70 million and also said it would cut about 110 jobs, or about 5% of its global workforce.

Avocent said Tuesday it completed the buyout of U.K.-based IT business management systems provider Touchpaper Group Limited for $45 million. It also disclosed a definitive agreement to acquire Ergo 2000, Inc., a Fullerton, Calif.-based provider of rack-mounted LCD consoles.

Touchpaper had revenues of about $34 million in 2007, while Ergo 2000 posted sales of about $33 million last year. Avocent said it expects the Ergo 2000 deal to close later in the current quarter.

Touchpaper gives Avocent new product and service offerings around incident management, problem management, and service desk capabilities. "It gives us a broader portfolio," said Ben Grimes, Avocent's chief technology officer, in an interview.

The Ergo 2000 deal extends Avocent's portfolio of rack management products, including diagnostic consoles. "A lot of our OEM customers like to go to one place to get a lot of that hardware infrastructure," said Grimes.

Grimes said the acquisitions will bring Avocent into closer competition with full-spectrum IT infrastructure management vendors, such as IBM and Hewlett-Packard, but claimed that the company's independence gives it an advantage. "A lot of folks we talk with are looking for vendors that are hardware agnostic," he said.

Avocent said it would fund the acquisitions through a mix of cash and credit.

Earlier this week, Avocent said it would reduce the size of its workforce by about 5% and take a second quarter charge against earnings of about $2.5 million to cover the cost of the layoffs. As part of the restructuring, Avocent said it plans to move support operations for Asia from Shannon, Ireland to Singapore.

Grimes said customers won't experience any service disruptions during the move. "We've done a great deal of planning in terms of how we'll do this," he said.

The company said the moves would result in pre-tax savings of $5 million to $6 million in the second half of 2008 and $26 million to $28 million in 2009. Second half charges will total about $5 million, Avocent said.

Avocent increased second quarter revenue guidance from between $150 and $154 million to between $155 million and $158 million.

Avocent's share price was up .78% to $21.95 in early trading Thursday.

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