Commentary: Peregrine's latest prey

By Kris Brittain, Gartner Analyst

Just when you thought merger activity in the battered technology sector had just about dried up, along comes Peregrine Systems and its $1.08 billion takeover of rival software maker Remedy.

Proving there is life left in the sector--although

	See news story: Peregrine to acquire rival for $1.08 billion

only for the better-capitalized companies--the takeover is a significant move by Peregrine, a maker of IT service desk software, and comes on top of its recent acquisitions of Harbinger and Extricity. It's also a defensive move against bigger companies such as customer relationship management (CRM) heavies Oracle, PeopleSoft and SAP. Peregrine's plan is to gain strength through rapid growth, an idea that's been tried before, though not always successfully.

Life in the technology business has, of late, been hard and wearing, and it shows in some of the deals and takeovers made since April 2000's so-called "tech wreck." Peregrine's buying of Remedy could be seen as a shrewd move, coming at an opportune time as Remedy's senior management assesses the company's future. Peregrine is developing a taste for bargain buys, and businesses wanting to throw in the towel are not hard to find.

With Remedy under its control, Peregrine will be able to market more aggressively to Remedy's traditional market of small and midsize businesses. Peregrine will likely continue to focus Remedy's products on that large and lucrative area, keeping its own products for the market segment that comprises bigger customers.

Still, that will probably last for only two years or so as Peregrine digests Remedy. Then it will likely push customers to move over to purely Peregrine products, a move it must make as it rationalizes the mishmash of Peregrine and Remedy products it will have in its nest.

Peregrine's strategy also takes it into the high-growth CRM software market, a very tough and competitive sector that will add to the pressure on its resources. As it seeks to increase market share in the CRM market, remaining competitive and profitable in its and Remedy's traditional markets will likely be a huge test of management's business skills.

(For related commentary on what to look for in selecting an asset management vendor such as Peregrine Systems, see TechRepublic.com--free registration required.)

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