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When will HP's software shopping spree pay off?

Opsware buyout pricey but could give HP an edge over big software rivals

By Denise Dubie , Network World , 07/26/2007

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By announcing plans this week to acquire data center automation vendor Opsware, HP continued to prove it is "serious about software," but the pending purchase has industry watchers wondering when HP's software strategy will evolve from one of spending money to making it.

HP's $1.6 billion bid for Opsware puts its investments in software over the past few years at about $6.5 billion, according to Thomas Hogan, senior vice president of HP Software. CEO Mark Hurd reported in June that HP had shifted its primary R&D focus from hardware to software and spent $500 million to integrate its now renamed OpenView software with acquired technologies. With 2006 software revenue of approximately $2 billion (a small percentage of HP's $90 billion total revenue last year), HP is spending more than it generates in software revenue annually.

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"[The Opsware acquisition is an] excellent move for the future of HP Software in terms of technology,” says Jean-Pierre Garbani, a research vice president at Forrester Research. "How are they going to get their money back is a big question; let alone how they are going to make money."

What HP has been buying
In addition to its proposed acquisitions last week of Opsware and Neoware, HP has made or announced more than 20 acquisitions in little more than two years. HereÕs a sampling:

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Acquisition:	SPI Dynamics	Bristol Technology	Mercury Interactive	OuterBay	Peregrine Systems	AppIQ
Completed:	Expected to be closed by the end of July.	March 2007	November 2006	February 2006	December 2005	November 2005
What HP gets:	Web-application security software.	Business trans-action monitoring software that covers Java 2 Platform Enterprise Edition, .Net and main-frame-based applications.	Application quality assurance, load-testing and performance management software as well as IT governance technology.	Information life-cycle management technology and database archiving and management software.	Asset manage-ment technology, which includes tools to determine the financial costs of support and maintenance.	Storage-area network and storage resource management capabilities.
Note: HP didnÕt disclose what it paid for these companies, except for Peregrine, which cost $425 million.

Click to see: HP buying spree

The Opsware deal, expected to close by the end of HP's fourth fiscal quarter, would become the company's third-largest acquisition behind Compaq (about $24 billion) and Mercury Interactive ($4.5 billion). Industry watchers say the technology could help HP surpass competitors such as IBM and enable HP to deliver the broadest set of management, provisioning and automation capabilities today.