Packeteer Picks Tacit

Looking to extend its sales and technology reach, WAN acceleration specialist Packeteer today stumped up $78 million in an all-cash transaction for wide-area file services (WAFS) vendor Tacit Networks. (See Packeteer Buys Tacit.)

The deal was reported as imminent last week in Byte and Switch. (See Sources: Packeteer Eyeing Tacit.) It comes less than eight months after Packeteer and Tacit entered a reseller arrangement to combine WAN optimization and WAFS wares. It is also Packeteer's second acquisition in this space, following its $16.5 million grab of Mentat in December 2004. (See Packeteer Gives Tacit Approval.)

Speaking on a conference call this morning, David Cote, the Packeteer CEO, said the deal was driven by his company's bid to extend its reach into the "delivery infrastructure" for the branch office. Tacit, he noted, opens the door to WAFS, virtual storage, network domain, and print services.

Packeteer, of course, is also getting its paws on Tacit's customer list, which includes such big names as Adobe, Chevron, Lego, T.Rowe Price, and Hitachi, not to mention the startup's OEM deal with Brocade. (See Brocade Invests in Tacit and Brocade, Tacit Join Forces.)

Brocade, for its part, has already confirmed that the WAFS OEM deal will now be extended to Packeteer, giving the WAN optimization specialist a clear path into the storage market. (See Brocade, Packeteer Team Up.) "Not only will Brocade continue to be the exclusive OEM distribution partner for Packeteer's WAFS products, but the two companies will explore additional strategic areas to mutually explore the opportunities before us," Cote said, although he did not reveal specific details.The acquisition highlights several trends in the WAN acceleration/WAFS market. First, several public companies have gobbled up startups. Cisco, for example, bought Actona and FineGround, Juniper acquired Peribit, and F5 picked up Swan Labs. (See Cisco Acts on Actona, Cisco Chomps FineGround, Peribit Deal: More to Come, and F5 Snaps Up Swan Labs.)

Then there's the integration of WAN acceleration and WAFS. Packeteer started in the first category, concentrating on quality of service (QOS), traffic shaping, and bandwidth monitoring. Last month it added TCP and HTTP acceleration from the Mentat deal. (See Packeteer Primes Protocols.) Tacit now gives the vendor additional WAFS capabilities, such as CIFS and MAPI optimization.

However, Cote did confirm that the Tacit product line will continue as is, and he said that integrating the two technologies into a WAN optimization/WAFS 'God Box' is not his top priority. "I don't think that we see this as an exclusively one-box solution -- we will look at the technologies to understand which pieces work most effectively together."

The fact that Packeteer was willing to spend as much as $78 million for Tacit underlines the growing momentum in this space. Other activities have also reflected the trend, such as Riverbed's recent decision to IPO. (See Riverbed Makes It Official and Sources: Riverbed Reaches for IPO.)

Packeteer execs have confirmed that for the second quarter, Tacit is expected to contribute $1 million in revenues and $1 million in operating losses. Cote also hinted that the 100-strong Tacit workforce will be moving over to Packeteer. "One of the key benefits of the acquisition is to bring the talented personnel from Tacit over to our team," he said.Cote added that more details on Packeteer's long-term plans for Tacit will be revealed in the vendor's upcoming second-quarter conference call. The deal is expected to close in the second quarter of this year.

The market responded positively to the deal. In early trading today, shares of Packeteer rose 25 cents (1.84 percent) to $13.87.

James Rogers, Senior Editor, Byte and Switch

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