HP Bids $1.6B For Datacenter Lead With Opsware

Jul 23, 2007

Clint Boulton

Looking to corral the market for automating tedious but vital datacenter tasks, HP (Quote) today agreed to buy Opsware Inc. for $1.6 billion in cash, a 38 percent premium over Opsware's Friday closing price of $10.28 a share.

Opsware's software is expected to help HP provision servers, networks and storage devices, and manage any changes in those resources to help companies reduce upgrades normally completed with manual labor.

Such jobs, including providing patches and upgrading software to newer versions, is a dull but necessary part of IT that helps businesses meet corporate compliance regulations, including Sarbanes-Oxley and HIPAA.

HP said in a statement it will use Opsware's assets with its existing IT management software, cobbled from previous major buys of Mercury Interactive and Peregrine Systems, in order to boost its business technology optimization (BTO) portfolio.

Should the deal close by the end of HP's fourth quarter, Opsware will become part of the HP Software business. Opsware CEO Ben Horowitz will lead HP's BTO organization, reporting to Thomas E. Hogan, senior vice president of HP Software.

Opsware, co-founded by former Netscape Communications wunderkind Marc Andreessen, began life in 1999 as a managed service provider called Loudcloud.

In 2002, Andreessen sold off the managed services division to Electronic Data Systems Corp. and Loudcloud eventually was reborn as Opsware, focused on automating datacenter tasks.

The rest is history.

Opsware has been growing steadily. Earlier this year, IDC ranked the relatively young company No. 2 next to IBM in the server provisioning market. Server provisioning is a slice of the overall server automation market IDC claimed will top $10.4 billion in a few years.

Signs that Opsware was being pursued were unmistakable since March.

The company bought IT operations automation startup iConclude for $51 million and reported that full year revenue for 2006 totaled $101.7 million, up 67 percent from a year ago.

A week later, the company held a high-profile analyst meeting in New York City to discuss in detail the state of the business; afterward, Horowitz and Andreessen met individually with the press in a bid to hammer home Opsware's viability.

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