Hit #24

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.