IBM ( IBM) agreed to acquire Micromuse ( MUSE) for $865 million, extending a move into the network-management space previously dominated by huge telecoms like AT&T and MCI.

Micromuse holders will get $10 a share in cash. The stock closed at $7.21 Tuesday and recently surged $2.59, or 36%, to $9.80 on Instinet. Micromuse shares have traded in a 52-week range of $3.97 to $8.13 a share. They last traded in the double-digits in February 2004 after falling from nearly $90 in January 2001.

The acquiree sells network software to corporate customers like banks and governments. It specializes in products that manage and monitor systems using voice and video -- a business that is also prized by Cisco ( CSCO) and Lucent ( LU). IBM will fold Micromuse into its Tivoli unit.

"The combination of Micromuse's software and IBM's IT service management technology will provide customers with a comprehensive approach for reducing the complexity of their IT environments, lowering operational costs, and addressing compliance mandates," IBM says.

Micromuse, whose revenue rose 10% to $160.8 million in the year ended in September, lists customers including America Online, British Telecom, the state of Michigan and the Securities and Exchange Commission.

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