Omniture (OMTR), the gorilla in online enterprise analytics and the related products and services, just bought Visual Sciences (VSCN, formerly Websidestory) - depending on who you ask, they're either #2 or #3 in the space (with WebTrends being the other player in the top 3). Visual Scences has a current reputation for wandering a bit - having done a bunch of acquisitions of its own and then failing to integrate them very well.
Omniture has been on a buying binge (Instadia, Offermatica, Touch Clarity, and now Visual Sciences). A lot of those paths end badly, but their stock has been going straight up the whole time. They also just hired a new HR executive specifically to help integrate acquisitions. They've realized they have a valuable currency, and they seem to be systematically using it to extend their reach into their customers and now, defend their flanks against encroachment from other companies. Visual Sciences wasn't executing great (they had a revenue multiple of 4.77 while Omnitures was 17.30 before the deal), but who cares? At these multiples, Omniture's market cap increases by $1.2B for paying $394M for Visual Sciences (the multiple will compress some, but still a several hundred million dollar market cap net gain for this deal), the deal is immediately accretive to their profits, and they've eliminated a competitor who puts price pressure on their individual deals. Omniture can keep some small pieces of the Visual Sciences platform that are interesting, cut a bunch of people, and migrate all of the customers to the combined entity over time. The migration will be painful for customers, and some will flee to WebTrends and Coremetrics, but their options for enerprise-class analytics are pretty limited.
If not for my investing rules, I'd look into buying OMTR now. A great deal that helps them lock up the space, is immediately accretive, reduces price pressure in their sales process, and has a huge net impact on their market cap given their multiple. They don't even have to integrate Visual Sciences at all if they don't want to - they could just sunset it entirely, and it would still be a good deal. Their major risk now is if someone bigger picks up WebTrends and/or Coremetrics and launches a price war in enterprise analytics. Maybe OMTR should buy both of those also - the multiple math might still work, although neither of those companies is public, so it's hard to say. If they keep rolling up the space, they'll also add a bunch of zeroes to the rumors of their own acquisition by Microsoft (MSFT) or Google (GOOG).
Technorati: Visual Sciences, Omniture, Webtrends, Coremetrics, investing, web analytics
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