BMC Software acquired Israeli startup Identify Software, a developer of application problem resolution software, for $150 million in cash Monday.

acquired Israeli startup Identify Software, a developer of application problem resolution software, for $150 million in cash Monday.

This was the second major Israeli acquisition by BMC, a Houston-based enterprise management software developer.

“The acquisition of Identify’s state-of-the-art application problem-resolution technology will further extend BMC’s leadership in transaction management and will continue to clearly differentiate our business service management strategy,” said BMC President and CEO Bob Beauchamp in a statement.

Negotiations between the two companies began last year. In the past BMC had expressed an interest in investing in the Petah Tikva-based startup.

BMC already has a substantial presence in Israel. In 1999 the company paid $650 million in cash to acquire New Dimensions Software. New Dimensions founder Dan Barnea currently serves as senior vice president for R&D at BMC.

Shares of BMC fell $0.13 to $21.88 in recent trading.

Getting Competitive Edge

“BMC is in head-on competition with Computer Associates, IBM, and Hewlett-Packard in the systems management space, and the Identify acquisition gives it a certain edge,” said Dan Yachin, emerging technologies analyst at IDC Israel.

Computer AssociatesHewlett-Packard

He added that Identify’s AppSight software is very innovative and dramatically reduces the time for resolving application problems.

Identify was started in 1996 by former Mercury Interactive employees. The company went through difficult times in 2000 and was forced to fire 80 percent of its workforce. Yochi Slonim was brought in as president and CEO.

Mercury Interactive

“Identify’s application life cycle management solution, coupled with BMC’s existing transaction management solution, will strengthen our business service management portfolio,” said Mr. Slonim.

Identity began actual commercial sales in 2002. The company had revenues of $23 million last year, according to Israeli high-tech industry sources.

So far, Identify has raised $63 million. The most recent round of financing came in February 2004 when the company raised $15 million, led by the Israeli venture firms Evergreen Partners and Star Ventures.

Other major investors included Earlybird, Formula Ventures, Infinity Funds, IntelCapital, Mofet, and Vertex Venture Capital. Last year, Plenus Venture Lending Fund extended a $5-million credit line to the company.

, Mofet, and Vertex Venture Capital. Last year, Plenus Venture Lending Fund extended a $5-million credit line to the company.