On Wednesday
10/6,
Computer Associates (CA) announced that it planned to acquire
Netegrity (NETE) for
$10.75/share, a
40% premium over the previous day's closing price of
7.5, but around a
51% premium over my average price of
$7.1/share.
This has been among my
least speculative bets, in the sense that a takeover was surely in the cards. This is also the one I cited most frequently, when people asked me to name one strong takeover candidate over the last year or so.
While I am happy that
Netegrity has finally been bought, I am disappointed that the buyer is
CA. I was hoping that someone else, like
IBM, would buy them. This, I think, is a bad deal for
Netegrity. Having used and liked Netegrity's software, I am unhappy to see them become part of
CA!
Thankfully, the deal is an
all cash deal! I would hate to get
CA shares in exchange for my
Netegrity shares!
While on
security, I think we will see more aggressive consolidateion here as security becomes the topmost priority for IT spending. A few others that are likely candidates:
- Internet Security Systems (ISSX): Definitely a buy at current price. Close to book value and with huge insider buying. Moreover, lots of cash in hand.
- Checkpoint Software (CHKP): No support from insiders, but again lots of cash stashed away. Very attractive for a buyer, but as an investor you should wait for a pullback to buy.
- Blue Coat Systems (BCSI): Relatively cheap compared to its price after the huge runup earlier.
- SonicWALL (SNWL) : Very attractive after the drop last week. There must be some desperation to sell here, I would think.
- Secure Computing (SCUR): Had a hostile takeover attempt earlier this year, but walked away from it. Still very attractive I would say.
So, if I had to pick one ? It would be
Internet Security Systems (ISSX). Buy all you can!
Among the above, I own
ISSX,
BCSI,
SCUR.
All of them are worth buying at current prices.
I bought
BCSI after the major pullback from its spectacular run earlier.
SCUR, I added after the takeover was rejected.
Will add
SNWL when I next get some cash to invest - practically broke now!
CHKP - will wait for a further drop.