CA Inc. (CA) Inks Deal To Acquire Austria-based Automic

In order to expand its presence in Europe, information technology (IT) management software company, CA Inc. (NASDAQ:CA) has inked an agreement to acquire Austrian business automation software company, Automic Holding GmbH for 600 million euros (($635 million).

Founded in 1985, Automic helps organizations to solve complex business applications whether on location; on premise or in the cloud. It has roughly 600 employees across Europe, North America and Asia. Some of the world's largest companies such as Bosch, Netflix, Inc. (NASDAQ:NFLX) , eBay, Exxon Mobil (NYSE:XOM), Vodafone (LON:VOD), General Electric (NYSE:GE) and Swisscom depend on Automic for their automation needs. We believe the association will strengthen the cloud computing business of CA and make it a complete service provider.

CA expects the deal to close in the fourth quarter of fiscal 2017, and be dilutive to fiscal 2017 GAAP earnings, non-GAAP earnings and cash flow from operations. Also, the company expects the acquisition to unfavorably affect GAAP and non-GAAP operating margin by 1%. However, fiscal 2017 revenues are expected to increase 0.5%.

With this acquisition, the company expects to utilize the automation solutions provided by Automic and expand its DevOps portfolio. Further, the acquisition will broaden CA’s portfolio and enable it to better serve its patrons with a complete solution to address the needs of automation across the enterprise.

This acquisition marks the continuation of CA’s strategy to grow inorganically, which strikes a balance between making investments for further growth and returning cash to shareholders.

Apart from pursuing growth through acquisitions, the company is leveraging cloud computing to enable organizations to source the best components – internal, external, private cloud, public cloud, mobile and more – to construct the most competitive business applications without wasting much time and resource.

The company is also focused on providing advanced management and security software required by organizations to take full advantage of this evolution.

On the flip side, CA's shares have yielded a negative 6.7% return for the past six months, in stark contrast to the Zacks categorized Computer-Software industry's positive 9.3%. The underperformance can be attributed to downward estimate revisions. With two out of three estimates moving down compared with one upward revision in the past two months, the Zacks Consensus Estimate for the current quarter declined from 59 cents to 57 cents.

Going forward, competition from the likes of Oracle (NYSE:ORCL) , International Business Machines (NYSE:IBM) and HP Inc. remain the near-term headwinds.

CA has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

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