Avocent banks on software business for growth

BANGALORE (Reuters) - Network equipment technology provider Avocent Corp AVCT.O plans to grow its software-driven business at a faster pace than its hardware business, which is taking a hit from the continued slowdown in server markets.

Avocent's aim is to grow its software sales to account for half of its total revenue over the next three years from the current contribution of about 30 percent of sales, its chief executive told Reuters in an interview.

"I am going to get that in three ways -- one is internal development, second is LANDesk software running in data centers and third is acquisitions," CEO Michael Borman said.

Avocent's LANDesk software business, which is not tied to server business, delivers security and process management solutions that help IT teams automate and simplify the management of desktops, servers and mobile devices.

Worldwide server sales have been hit hard by reduced budgets, leading to server unit shipments falling 30.4 percent in the second quarter, the largest ever year-over-year quarterly decline, according to research firm IDC.

The company does not anticipate any improvement in IT budgets for the rest of the year, Borman added. However, he sees slight growth next year.

Avocent's management systems division business, much of which is tied to server shipments, fell 28 percent in its latest second quarter. However, LANDesk business unit grew 15 percent.

Avocent plans to continue to grow its LANDesk by roping in business partners and building a better distribution channel but, for now, its core focus would be to try to get more of its software into data centers, Borman said.

To that end, the company has developed Avocent MergePoint Infrastructure Explorer, also called AMIE, which is its first software product for use in data centers that does not rely on server shipments.

"I am looking for global partners as well as regional partners that will help me sell LANDesk," Borman added. Currently, Avocent's biggest partner for LANDesk is Lenovo (0992.HK).

The company, which competes with the likes of Microsoft Corp (MSFT.O), Symantec Corp (SYMC.O) and BMC Software Inc BMC.N, also sees higher opportunity in the data center market compared with the desktop business.

"Clearly there is opportunity in both desktop and data center but with data center it seems to me with cloud computing and some of the new initiates going out there, the opportunity is greater than on the desktop," CEO Borman said.

Shares of the company, whose customers include Yahoo (YHOO.O) and Brocade Communications Systems (BRCD.O), have gained about 78 percent of their value in the last six months.

Avocent also counts IBM (IBM.N), Dell Inc (DELL.O) and Hewlett-Packard Co (HPQ.N) as its OEM (original equipment manufacturer) partners.

(Editing by Maju Samuel)