Who Should Hewlett-Packard Buy?
HP can't afford to buy every one of our Desirable Dozen, but in the post-Mark Hurd era, the world's largest computer maker needs to consider acquiring more than a few of these companies. Here's who -- and why.
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The resignation of Mark Hurd and Hewlett-Packard's search for a new CEO raise questions about HP's long-term strategy. Under Hurd's watch, HP plowed more deeply into IT services with the $13.9 billion acquisition of EDS, spent $1.2 billion for smartphone OS vendor Palm, and shored up its position in networking with the $2.9 billion purchase of 3Com and in the data center with the $4.5 billion acquisition of management software company Mercury Interactive. HP accumulated several more niche companies along the way, but there's still plenty more to do.
Once HP's board names a successor, where should he or she be spending the company's acquisition dollars? What follows is our Desirable Dozen list of potential targets, compiled by InformationWeek's editors. We understand that HP can't buy every one of these companies. Although it has a healthy war chest -- more than $14 billion in cash at the end of the second quarter--there are limits to what HP can spend. But it needs to consider buying more than a few of these companies.
Two HP attributes -- it plays well with many vendors and provides customers with strong options as opposed to just HP-branded products -- would transfer well into the infrastructure-as-a-service market. HP needs to plunge in. Buy Rackspace and preempt a belated move by IBM.
One serious gap in HP's networking strategy remains application delivery and performance management. F5 Networks, already an HP AllianceOne Partner, would complement HP's story in high-speed data centers, application transformation and cloud computing. F5's BigIP appliances and application delivery products play a critical role in assuring application performance by adding new servers to existing application pools and load balancing among multiple data centers.
NetApp sells both block-based SAN and file-based NAS storage. It has a proven history of providing solid products that perform well and it would be a great data center complement to HP's server and networking strengths. At about one-third the size of EMC, NetApp still has room to grow and would benefit from access to HP's expansive customer base.
Public and private cloud computing require moving large amounts of data over a WAN. Silver Peak's NX appliances, which compete with those from Riverbed and Cisco, can significantly reduce data transfer times. And the company's partnerships with the likes of Brocade, CommVault, EMC, Hitachi Data Systems, NetApp, and 3Par would give HP inroads into storage customers.
Voltaire could be instrumental in helping HP build out its virtual IO offering and for high-performance computing, including database appliances. But more interesting is Voltaire's Unified Fabric Manager, which oversees both Infiniband and Ethernet network performance by monitoring utilization, predicting congestion points, and managing the fabric paths to reduce congestion. Sophisticated fabric management will be a differentiator in converged data center networking and cloud architectures.
Why pussyfoot around if you're serious about getting into enterprise software? Buying SAP would give HP a huge start. HP could treat the company as a standalone unit, much as SAP is handling its recent Sybase purchase. HP already has a team onsite at SAP's labs in Waldorf, Germany. The two companies have been working together for years to deliver optimized configurations and systems, including SAP BW Accelerator and SAP BusinessObjects Explorer, and tighter integration would position HP to go toe-to-toe with Oracle and IBM in the single-stack play.
To bolster its Business Intelligence Solutions unit, HP should consider doing all three acquisitions. Informatica is a fast-growing information integration vendor and the largest of the remaining independents. With Teradata, HP could ditch its fledgling Neoview product and take advantage of the real McCoy and its top-drawer customer list. HP economies of scale would help Teradata slash prices and take on aggressive competitors like Netezza. MicroStrategy would be the finishing touch: the biggest of the remaining BI independents with an A list of large-scale deployments. What's more, MicroStrategy has an unrecognized trove of analytic capabilities, including its Angel.com call services unit.
Just admit you made a mistake in acquiring Palm and buy the real deal. In the consumer smartphone market, you'll never be cooler than Apple and you'll never out-engineer Google, so focus on the enterprise. But RIM will cost a lot more than Palm did.
HP is a data center management software company, growing out of its OpenView platform. To improve that position, it should be working with the dominant vendor on the high end, VMware, and providing tools that broaden or expand what VMware can do. Many are being invented. HP could assemble a winning collection, like Akorri, Vizioncore, and John Thompson's new firm, Virtual Instruments. See also Embotics, Xangati, VKernel, and ManageEngine.
One of the most respected business strategy and technology consulting firms in the world would give HP entre to a new set of high-level decision-makers in large organizations worldwide. While there's some overlap in outsourcing with the former EDS, that's not nearly enough of an issue to outweigh the C-level chops HP could gain by weaving Accenture into its fold. But Accenture would be pricey -- extremely so -- which might provide a tough hurdle for a brand new CEO to overcome.
Very focused on CIO-related issues but also strong in business strategy for particular industries, Capgemini could provide HP with some of the high-level customer-facing insights that would enable the company to more effectively package and deliver its massive array of products and technologies. With a solid presence in the U.S. but even stronger brand recognition abroad, Capgemini and its global revenue profile would map nicely to that of HP, which generates about 63% of its revenue outside the U.S.
Very focused on CIO-related issues but also strong in business strategy for particular industries, Capgemini could provide HP with some of the high-level customer-facing insights that would enable the company to more effectively package and deliver its massive array of products and technologies. With a solid presence in the U.S. but even stronger brand recognition abroad, Capgemini and its global revenue profile would map nicely to that of HP, which generates about 63% of its revenue outside the U.S.
The resignation of Mark Hurd and Hewlett-Packard's search for a new CEO raise questions about HP's long-term strategy. Under Hurd's watch, HP plowed more deeply into IT services with the $13.9 billion acquisition of EDS, spent $1.2 billion for smartphone OS vendor Palm, and shored up its position in networking with the $2.9 billion purchase of 3Com and in the data center with the $4.5 billion acquisition of management software company Mercury Interactive. HP accumulated several more niche companies along the way, but there's still plenty more to do.
Once HP's board names a successor, where should he or she be spending the company's acquisition dollars? What follows is our Desirable Dozen list of potential targets, compiled by InformationWeek's editors. We understand that HP can't buy every one of these companies. Although it has a healthy war chest -- more than $14 billion in cash at the end of the second quarter--there are limits to what HP can spend. But it needs to consider buying more than a few of these companies.
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