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7/23/2007
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HP Hopes To Give IT Pros 'The Simple Life' With Software Acquisitions

HP bought Opsware and Neoware, which offer products and services designed to simplify the operation and maintenance of corporate computing networks by centralizing and automating key tasks.

With agreements in place to purchase Opsware and Neoware for a combined $1.8 billion, Hewlett-Packard is bolstering its portfolio of products that can simplify life for business technology professionals tasked with managing computer networks overstuffed with the access, server, and storage devices needed to support corporate America's always-on, digitally connected lifestyle.

The company announced Monday that it had agreed to acquire infrastructure management software vendor Opsware for $1.6 billion, or $14.25 per share, and thin client computer maker Neoware for $214 million or $16.25 per share. Both companies offer products and services designed to simplify the operation and maintenance of corporate computing networks by centralizing and automating key tasks.

Thomas Hogan, HP's senior VP for software, said on a conference call Monday that the deals are "a coincidence from a timing perspective, but there could be some synergy and value" between the product lines sold by Opsware and Neoware.

Opsware offers software to automate the maintenance, operation, and provisioning of networks and servers, as well as tools for asset management and IT process automation. Neoware sells hardware and software that allows users to build thin client desktop systems that can be centrally managed from servers with little deskside intervention.

Hogan said that, among other things, Neoware's client management capabilities could complement Opsware's network and server management tools.

Finding ways to simplify IT systems and reduce computing expenses is becoming crucial for most businesses. On Monday's conference call, Opsware CEO Ben Horowitz noted that 500,000 servers were shipped into corporate IT environments in 1995. He said that number had mushroomed to 7 million as of 2007, adding that IT labor costs have increased sixfold over the same period. With more and more commerce shifting to the Internet, he said, "We stand here on the verge of what we believe is going to be the largest IT build out in history."

Businesses are going to need tools to manage that build out, and HP's acquisition of Opsware will give the companies a chance to combine their offerings on behalf of customers.

For instance, some of the tools that HP acquired through its $4.5 billion acquisition of Mercury Interactive a year ago could be integrated with Opsware's offerings, said Horowitz. "How valuable would it be for customers, when they see a performance issue, to go in and make a configuration change and fix that issue," he said. "It's not doable today in any system, but it's a quick integration we can now do."

Hogan said he saw very little overlap between Opsware's products and HP's existing line of system management tools, which has been bolstered in recent months by the Mercury buyout and the company's purchase of Peregrine Systems for $425 million in 2005.

The combination of HP and Opsware products also could cause headaches for IBM, which IDC says currently leads the market for infrastructure management tools with its Tivoli branded products. Some analysts on Monday's call even speculated that IBM might need to make a counteroffer for Opsware to defend its position. "I can't speculate on what IBM might do," said Hogan.

Opsware will be folded into HP Software's Business Technology Optimization unit, which will be headed by Horowitz.

As for Neoware, HP official's said the company's Linux-based thin client systems will complement HP's existing Windows-based thin clients. HP said it plans to integrate Neoware's operations into the business desktop unit of its personal systems group.

HP said it expects both the Opsware and Neoware deals to close in its fiscal fourth quarter of 2007, pending regulatory and other approvals.

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