HP Snaps Up Two Software Companies

HP's move to buy Opsware for $1.6 billion follows a strategic relationship the companies forged in 2003 in which Opsware provided its automation center to HP's Utility Data Center, a virtualization solution. In addition, the purchase of Opsware complements HP's acquisition last year of Mercury Interactive for approximately $4.5 billion.

Hewlett-Packard announced on Monday that it will acquire two companies expected to improve the Silicon Valley giant's business technology offerings. Opsware, a data center automation software company founded by Netscape creator Marc Andreessen and acquired for roughly $1.6 billion, will boost HP's data center portfolio, while NeoWare, acquired for $334 million, will help HP with thin-client technology.

HP plans to have Opsware CEO Ben Horowitz lead its business technology optimization group. Neoware will join HP's business desktop unit.

"This is an incremental opportunity for HP to help companies manage data centers more appropriately," said Brian Babineau, senior analyst for Enterprise Strategy Group. The purchase enhances HP's position by adding data center infrastructure Relevant Products/Services management to their existing expertise in process management, he said. Opsware gives HP "the ability to deploy servers, automate configuration, do patch management ... to automatically identify issues and take action," Babineau explained.

Complements Mercury Buy

The move to buy Opsware follows a strategic relationship the companies forged in 2003 in which Opsware provided its automation center to HP's Utility Data Center, a data center virtualization solution. In addition, the purchase of Opsware complements HP's acquisition last year of Mercury Interactive for approximately $4.5 billion. While Mercury's strength is in addressing performance bottlenecks and service-oriented architecture governance, Opsware's offerings will help HP get into "automated management of servers storage network," Babineau said.

Marc Andreessen founded Opsware as Loudcloud in 1999; it went public in 2001. The company was hit hard when the bottom dropped out of the tech market, and in 2002 sold off its managed network services business to EDS and reinvented itself as Opsware. It boasts 350 customers, including major financial and technology companies as well as the Defense Department.

Opsware's technology provides the ability to automate deployment and management of servers and storage. In combination with Mercury's offerings, if customers "want to deploy, they will be able to tune and optimize and deploy in an automated fashion," Babineau said. "Opsware can help deploy new servers and servers with configurations that comply with best operating procedures and internal or external rules."

Higher Scale Automation

In a statement announcing the Opsware acquisition, Thomas E. Hogan, senior vice president for HP Software, said the deal will enable HP to help customers resolve "one of their critical pain points: controlling the increasing complexity and cost of managing the data center."

Existing Opsware customers might see the acquisition as protecting their investment in the company's technology, Babineau said. "They'll have a much bigger company that owns the technology," he noted. For HP customers, the deal represents one more arrow in HP's quiver. "Customers will be able to do the majority of their data center purchasing through HP."

Announcing the news on his blog, Andreessen wrote that the deal means the company's vision will now get delivered at much higher scale. "Being part of HP's software business," he wrote, "will ensure that our software will be used by a much larger number of organizations and have an even more dramatic impact on the industry than we would possibly have been able to reach by ourselves over the next several years."

A Premium Valuation

While the Neoware deal is much smaller, Babineau said, it is also an important acquisition. "When you're trying to control and manage desktops as a customer, you might have outsourced that to a company like EDS," Babineau said. Customers now will be able to buy those services directly from HP.

HP paid $14.25 a share in stock for Opsware, a 39 percent premium on the pre-announcement stock price. "That's good for Opsware," Babineau said. "It's expensive in my opinion. Opsware had been treading water. They had a reasonably stable business but it hasn't been a rock star." It's especially good for founder Marc Andreessen. The Netscape creator will pick up a cool $138 million in the deal, on the basis of his ownership of 9.7 million shares.