HP takes out Opsware for $1.6 billion; Andreessen scores

Hewlett-Packard on Monday beefed up its data center software business with a $1.6 billion acquisition of Opsware.
Written by Larry Dignan, Contributor

Hewlett-Packard on Monday beefed up its data center software business with a $1.6 billion acquisition of Opsware.

Opsware makes automation software that puts many data center operations on autopilot. HP, looking to become a big player in the area, said it is paying $14.25 a share for Opsware, which closed Friday at $10.28.

The HP purchase is also good news for Marc Andreessen, co-founder of Opsware. Andreessen is chairman of Opsware and owns more than 9 percent of the company, or 9.7 million shares, according to Opswere's latest proxy filing. He also had had 1.9 million options outstanding as of Jan. 31. For fiscal 2007, Opsware paid Andreessen $972,185 in total compensation, according to Opsware's proxy filing.

HP said in a statement that it will combine Opsware's applications with its IT management software. HP's business technology optimization portfolio includes Mercury Interactive, Peregrine Systems and now Opsware. HP had been on the prowl for systems management software vendors.

With the deal HP is acquiring a company that could be ready to takeoff. Enterprise customers are increasingly managing data centers remotely and trying to automate key tasks such as testing servers and allocating computing power and storage. Meanwhile, Opsware had a partnership with Cisco that was expected to start boosting Opsware revenue in the quarter ending October 31. Opsware, however, has reported losses the last four quarters and for the quarter ending April 30 the company lost $10.6 million. Excluding charges Opsware, which counts EDS as a major customer, lost $1.4 million.

Nevertheless, analysts have been coming around to the Opsware story as virtualization and automation become bigger factors in IT management. In a recent research note, UBS analyst Abhey Lamba said Opsware has the "wind at its back" due to the increasing popularity of server automation. Lamba estimated that the server management market was primed to produce a compounded annual growth rate of 22 percent over the next five years.

That potential had Opsware on many takeover target lists. HP, EMC and Oracle were mentioned as likely buyers.

Opsware CEO Ben Horowitz is expected to lead HP's business technology optimization group. Horowitz will report to Thomas E. Hogan, senior vice president, HP Software.

Update: HP has been busy this morning. HP also said that it will buy Neoware, which makes thin client computing and virtualization software, for $214 million, or $16.25 a share.

HP said:

Acquiring Neoware is intended to accelerate the growth of HP's thin client business by boosting its Linux software, client virtualization and customization capabilities, expanding its regional sales footprint and broadening its hardware portfolio.

Update 2: Marc Andreessen chimed in on the Opsware deal with some history on the early days when it was actually Loudcloud. I remember the 2002 restart well and how the company quietly won over customers.

Andreessen wrote:

In September 1999, at the height of the dot com boom, a small group of colleagues and I started a new company, Loudcloud, based on the idea that the huge Internet infrastructure buildout then underway -- by startups and big companies alike -- required a new approach to running modern datacenters and computer systems at high scale: automation.

The eight years that have followed have been an unbelievable journey.

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