Agilysys Fills Sun Spot With Innovativ

Agilysys' (VARBusiness 500 No. 86) recent proposed acquisition of Innovativ (No. 136) will provide the solution provider with more than just an entre into the Sun marketplace. The purchase of the $260 million Innovativ will also give Agilysys the expertise of the largest U.S. commercial reseller of Sun Microsystems servers and storage products. The purchase would create a company with pro forma revenue of $800 million.

"This is our first real relationship with Sun," says Martin Ellis, executive vice president, treasurer and CFO at Agilysys, which partners with EMC, Hewlett-Packard and IBM. Picking up Sun will deliver a needed core competency in the enterprise space, Ellis says, adding that Agilysys sees growth potential in the markets Sun serves, particularly in enterprise servers and storage.

The $100 million cash deal is expected to close July 1. In addition, Innovativ will receive $2 for every dollar of earnings after taxes greater than $50 million during the first two years of the closing. The total deal could be worth up to $190 million, according to the companies.

Sun's year-to-year total server revenue market share grew for the fifth straight quarter in the first quarter of 2007, according to the IDC Worldwide Quarterly Server Tracker, released at the end of May. Those figures fit into Agilysys' ambitious plans as well; the company hopes to increase sales from about $500 million to $1 billion within two years, and to $1.5 billion in three years.

Ellis says another benefit of the deal is Innovativ's management executives, who have led that company to tremendous growth recently. Innovativ CEO Tony Mellina will become senior vice president of Agilysys' new Sun Technology Solutions unit.

"We get the strength of that team," he says. Indeed, Innovativ has seen steady revenue growth year-over-year, and the VAR received the 2005 VARBusiness Top Revenue Generator Award, a distinction given to companies exhibiting remarkable revenue growth.

Lawrence M. Walsh contributed to this story.