Acquisitions - HP Buys Neoware and Opsware

HP acquires Opsware, Neoware
25 July 2007

Computer hardware and peripherals giant Hewlett-Packard Co. (HP) has extended its reach into enterprise software with the acquisition of two enterprise software firms.

Based out of Palo Alto, California, HP announced its plans to acquire Opsware Inc., a Sunnyvale, California-based maker of data center automation software, for $1.6 billion. It also disclosed plans to pick up Neoware Inc., a Pennsylvania-based maker of thin client computing technologies, headquartered in King of Prussia for another $214 million.

HP said it would acquire both companies by way of cash tender offers, paying $14.25 per share for Opsware, and $16.25 per share for Neoware.

HP's acquisition of Opsware represents a 39 per cent premium to the company's July 20 closing price of $10.28. Opsware shares climbed 36 per cent to close at $14 apiece on Monday. For Neoware, the acquisition represents a 6.6 per cent premium over the company's Friday's closing prices of $15.24. Neoware shares gained 3.7 per cent at $15.81.

The deals are evidence of HP's growing interest in enterprise software, a much higher margin business than its forte of consumer PCs. Virtualization technologies, which are supported by both Opsware and Neoware, are gaining increasingly popularity with companies seeking ways to streamline back offices and to cut down power consumption to save money.

One of the leaders in the virtualisation space, EMC Corp.'s VMWare Inc. is preparing for an initial public offering. Most computer hardware majors like HP, IBM Corp. and Sun Microsystems Inc, are working to expand their virtualization technologies via both organic growth and inorganic acquisitions.

Last week a research report on virtualisation technologies outlined mounting pressure on companies to distinguish their product offerings as the sector faced commoditization. The report said a number of small companies could become attractive acquisition targets.

HP worked internally to expand its virtualization and thin client computing technologies, which are Windows focused. Neoware will bring with it exposure to Linux technologies to help balance its homegrown software. Thin client computing systems allow computers to run Web applications across networks, eliminating the need to store these applications on individual computers.