NetScout Systems raises guidance, acquires Network General
Shares of NetScout Systems, Inc. (Nasdaq: NTCT), a provider of products for the optimization of high-speed networks, today raised guidance for its second quarter of fiscal 2008 and announced it is acquiring Network General Corp. for $205 million.
For the three months ending Sept. 30, the Westford, Mass.-based firm said it now anticipates earnings per diluted share in the range of $0.09 to $0.10, above the previously issued guidance range of $0.08 to $0.09. NetScout said this represents year-over-year net income per diluted share growth of 29% to 43%.
“They’ve been experiencing a robust environment in performance management, specifically in the wireless and financial vertical segments from customers like Cingular, Goldman Sachs and Merrill Lynch,” said Brean Murray Carret & Co. analyst Peter Jacobson.
NetScout now expects total revenue to be in the range of $29 million to $30 million, compared with the previous guidance range of $28 million to $29 million. According to the company, this represents year-over-year revenue growth of 16% to 20%.
“Revenue has substantially increased in the vertical telecom area over the last year, or year and a half—it relates to the proliferation of wireless usage with clients like Cingular,” said Jacobson. “The financial sector has typically been a good market in that there has been an increase in need for [NetScout’s] applications.”
Jacobson also adds that the government has been a lucrative segment for NetScout as well.
The company also reported it will acquire Network General Corp. through a combined cash, stock and debt transaction for $205 million. San Jose, Calif.-based Network General is a privately held company that specializes in IT management specifically for integrating and simplifying troubleshooting across IT domains.
Jacobson said he thinks the acquisition is complimentary. “Network General has traditionally been a head to head competitor for NetScout,” said Jacobson. “General’s product line is complimentary and deepens NetScout’s customer base while eliminating its key competitor.”
NetScout said it anticipates that the acquisition will approximately double its current revenue rate in fiscal 2009 and that the transaction will be accretive for fiscal year 2009 on a non-GAAP basis. The company said it expects to achieve faster revenue growth through a broader, better-integrated product portfolio.
Additionally, NetScout said the combined company will create a larger and more diversified customer base supported by a larger sales force.
The entity plans to double R&D spending; however, it anticipates significant cost savings will be realized with the addition of Network General, which will improve operating margins and earnings per share.
The acquisition is expected to be completed by early November.
On Thursday, shares of NetScout (NTCT) rose $0.37, or 4.06%, to $9.49 during the last hour of trading.
