Update: HP to acquire Opsware for $1.6B

Hewlett-Packard Co. has announced plans to buy data center automation software vendor Opsware Inc. for about $1.6 billion. It's the third-largest acquisition in HP's history, after its multibillion-dollar purchases of Compaq and Mercury.

HP said today that it has signed a definitive agreement to acquire Opsware in a cash tender deal that values the company at $14.25 per share. Opsware's stock was $10.28 at the close of Friday's trading.

Once the deal closes, HP plans to combine the Opsware software with its own enterprise IT management software, as the new acquisition becomes part of HP's software business.

"The acquisition of Opsware is intended to enable HP Software to help our customers resolve one of their critical pain points: controlling the increasing complexity and cost of managing the data center," Tom Hogan, senior vice president of software at HP, said in a news release. On a conference call to discuss the proposed acquisition, he added that the move should be seen as part of HP's strategy to become a leader in the software industry, particularly in data center management.

HP has been steadily expanding its business technology optimization (BTO) portfolio over the past couple of years through acquisitions, including the purchases of Mercury Interactive and Peregrine Systems. Including the Opsware planned acquisition, HP will have spent about $6.5 billion on BTO-related software, Hogan said. The vendor bought Mercury last year for $4.5 billion.

As with Mercury, there's "very little overlap" between HP and Opsware software, according to Hogan. Opsware's business has been largely focused on the Americas, so he sees plenty of opportunity for HP and its BTO partners to sell the software in Europe and the Asia-Pacific region. HP doesn't intend to sell Opsware software as a stand-alone offering and will instead integrate it into its own BTO software, because that's what customers are looking for, Hogan said.

Opsware has more than 350 customers, according to Ben Horowitz, CEO and co-founder of Opsware. The company has mostly sold its software directly but has one significant channel partner, Cisco Systems Inc., which is also a strong indirect partner for HP.

After HP has closed the acquisition, the vendor expects to appoint Opsware CEO Ben Horowitz as head of its business technology optimization organization, reporting to Hogan. HP intends to take on all 550 Opsware staffers, Hogan said, citing their expertise as key to the success of the acquisition.

HP hopes to close the purchase, subject to regulatory approval, before the end of October. Opsware System software automates data center operations, including provisioning, configuration and deployment. Co-founded in 2002 by Horowitz and Marc Andreessen, the company has its headquarters in Sunnyvale, Calif. Andreessen is chairman of Opsware and is known for having created the Mosaic Web browser. He subsequently co-founded Netscape and later was chief technology officer at American Online Inc. after the company purchased Netscape.

HP also announced plans today to acquire another company, thin-client and virtualization software vendor Neoware Inc., for about $214 million. Hogan said that the timing of the two announcements was purely coincidental and that there may be some synergy between the technologies HP will gain from Opsware and Neoware in the area of client management.

Copyright © 2007 IDG Communications, Inc.

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