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NetIQ to merge with WebTrends in $1 billion deal

The software makers agree to a stock swap to form a combined entity they hope will expand their presence in the enterprise software arena.

Hoping to expand their presence in the enterprise software arena, software makers NetIQ and WebTrends on Wednesday said they have agreed to merge in a stock deal valued around $1 billion.

San Jose, Calif.-based NetIQ is largely known for its focus on developing software and tools that manage computer systems running on Microsoft Windows NT and Windows 2000 technology. Its core software essentially automates many computer management functions and helps detect and resolve problems with servers. Portland, Ore.-based WebTrends makes software and tools that help analyze Web traffic.

Both companies said the combined entity would give customers a broader software portfolio, with product lines that handle a company's systems administration, network performance management, operations management, security management, Web management, and business analytics and intelligence.

Both boards approved the transaction. The combined company will operate under the name NetIQ.

Under the terms of the deal, WebTrends shareholders will receive 0.48 NetIQ stock for each WebTrends share. Based on NetIQ's closing price Tuesday of $75 per share, the transaction is valued at $36 per WebTrends share, or a total of approximately $1 billion, the companies said. On a fully diluted basis, NetIQ said, its shareholders would own roughly 76 percent of the merged company, and WebTrends shareholders would own the remaining 24 percent.

If approved by regulators and shareholders, the deal could give the new NetIQ revenues of approximately $160 million for fiscal 2000, more than 52,000 customers and about 1,000 employees.

The WebTrends agreement comes a year after NetIQ announced its plans to merge with Mission Critical Software, another maker of network management software. The deal at the time was worth roughly $1.42 billion in stock.

NetIQ recently signed a deal with Microsoft whereby the software giant will pay the company $175 million in licensing fees and $6 million in engineering codevelopment funds over the next three years. Microsoft also is investing $5 million annually in the company and intends to provide it with an additional $5 million annually in marketing funds.

NetIQ is slated to issue second-quarter earnings Thursday after the market closes. WebTrends is on tap to release its fourth-quarter results next Tuesday. Both companies said they expect to report results above analysts' revenue and earnings estimates.

Analysts polled by First Call expect NetIQ to post a second-quarter profit of 18 cents and project that WebTrends will earn 10 cents in its fourth quarter.

Chief Executive Officer Eli Shapira plans to join NetIQ's board and become chief strategy officer for the combined company. Glen Boyd, currently president and chief technology officer of WebTrends, will become chief information officer of NetIQ, and Dan Meub, currently chief operating officer, will become senior vice president of WebTrends products at the new NetIQ.

The combined company will be headquartered in San Jose, Calif. with development and operational employees located in Houston; Raleigh, N.C.; and Bellevue, Wash. The companies said the new entity will also maintain operations in Portland, WebTrends' current home base.

The transaction, which will be accounted for as a purchase and is expected to be tax-free to each company's shareholders, is slated to close either late in the first-calendar quarter or early in the second quarter.

Both companies said that shareholders of approximately 30 percent of WebTrends' outstanding shares have agreed to vote in favor of the merger. The transaction is expected to add to NetIQ's earnings per share beginning in the June quarter, excluding any merger-related charges.