Update: Loudcloud now Opsware, sells part of business to EDS

Loudcloud Inc. has renamed itself Opsware Inc. and sold its managed services business to Electronic Data Systems Corp. in order to rebrand itself as an enterprise software maker, said the Sunnyvale, Calif.-based company in an announcement today.

Opsware is the name of Loudcloud's IT automation software, and the company said it has chosen to focus on this rather than managed services. The software has been the foundation of Loudcloud's managed services business, but there has been strong demand from customers wanting to use it internally, Opsware said in a separate statement.

The software will now be available to enterprises, government agencies and service providers for internal use, the company said.

Plano, Texas-based EDS is buying Loudcloud's managed services division for $63.5 million. Opsware said it expects the 2002 revenue stream for the business to reach about $75 million.

This will allow EDS to cement its leadership position in Web hosting and managed services, EDS Information Systems' Vice President for Delivery Jeff Kelly said in a Webcast.

All of Opsware's managed service customers will be migrated to EDS after the expected completion of the deal in September, he said. There is some duplication of customers between the two companies, but not a large proportion, he said.

In terms of new business, "our main focus will be in the U.S. to begin with, and we will focus on our large enterprise customers first," Kelly said.

The license agreement is "selectively exclusive," Opsware Chairman Marc Andreessen said during the Webcast. He would not specify names but said that the company would not accept some large global players as licensees. Opsware would "be very focused on EDS," he said.

Opsware would now be solely interested in developing, selling and supporting Opsware software with EDS as its major client. Four other clients -- two financial organizations and two government agencies -- have agreed to license the software, he said.

The sale of the hosting business is indicative of the move toward consolidation in the outsourcing market, Andreessen said.

Around 140 Opsware employees will be moved to EDS' workforce, Kelly said.

EDS will also license the Opsware software for use across its 50,000 servers in 14 major data centers plus 140 regional and client-owned centers worldwide. It will pay an additional $52 million over three years for this license.

Loudcloud was established in 1999 by Andreessen, a co-founder of Netscape Communications Corp.

Copyright © 2002 IDG Communications, Inc.

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