Micromuse to buy Riversoft for £43m

Continued telecoms woes force a merger of embattled network management rivals, but the companies may face problems bringing their technologies together

Network management software firm Riversoft agreed on Wednesday to a £43m offer from its rival, Micromuse. The two firms, which make Operations Support System (OSS) software for service providers, have been very hard hit by the slump in telecoms. However, rivals questioned whether the products could be integrated, and whether the remaining market was strong enough to support them. "In view of the weakness in the markets in which Riversoft operates and the increasing need for critical mass, shareholders would be better served by Riversoft becoming part of a larger group," a statement from Riversoft said. Both companies' revenues have fallen by about 35 percent in the last year. Last August, Riversoft laid off around a third of its staff to prolong the time before it needed to make a profit, but evidently ran out of money before this could happen. "Both sides are in a tough spot," said Roger Pilc, chief executive of rival firm Smarts. "Whatever feelings existed, both felt they were in a desparate enough situation to do it." Riversoft was founded in 1997, by Phil Tee, who previously developed Micromuse's flagship NetCool product. Mr Tee is currently president and chief technical officer of Riversoft, and seems likely to stay at Micromuse, at least in the short term, though no announcements were made in advance of a telephone briefing on Wednesday evening. "We will look at opportunities to further strengthen Micromuse with members of the Riversoft team," said a Micromuse statement. Both companies' software manages faults in telecoms systems, and handles performance issues. While MicroMuse's NetCool range built up from an original product that diagnosed faults by filtering the alerts produced by network equipment, Riversoft's Network Management Operating System (NMOS) attempted to extend the "discovery" process to create true maps of networks in real time. Its latest version, 3.1, was launched on 12 June, and concentrates on support for leading-edge telecoms technologies, such as virtual private networks (VPNs) and multi-protocol label switching (MPLS). Riversoft's main successes have been with new telcos, which have been particularly hard hit by the telecoms slump. Micromuse is likewise reliant on telcos for 75 percent of its revenues, but this is not the only reason for their troubles, according to Pilc: "There is a shift in the marketplace from event management towards discovery, topology and root cause analysis." Both Micromuse and Riversoft have themselves been enthusiastic evangelists for this change, and throughout its life Riversoft has often emphasised how much better than Micromuse it is at the "new style" network management. The industry will be watching closely to see how easily Riversoft's features can be added to Micromuse products. In November 2000, Hewlett-Packard bought the rights to use Riversoft's source code in its market-leading OpenView management platform. Despite talk of a future version of OpenView based on NMOS, nothing has emerged, backing fears that integration of network management functions into another company's products will be difficult. A spokesman confirmed that HP would have no stake in Micromuse after the acquisition. For its part, Micromuse said in a statement that it would adopt Riversoft technology, especially that for inventory management, end-to-end discovery (at Layer 2 and 3) of ATM and MPLS. The visual NMOS environment, and faster root-cause analysis would also be added in, either to create new products, or new versions of existing Micromuse products.

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