Update: HP to acquire Opsware for $1.6 billion

Hewlett-Packard plans to buy datacenter automation software vendor Opsware for about $1.6 billion. It's the third-largest acquisition in HP's history after its multibillion-dollar purchases of Compaq and Mercury.

HP said Monday that it had signed a definitive agreement to acquire Opsware in a cash tender deal that values the company at $14.25 per share. Opsware's stock was $10.28 at the close of Friday's trading.

Once the deal closes, HP plans to combine the Opsware software with its own enterprise IT management software, as the new acquisition becomes part of HP's software business.

"The acquisition of Opsware is intended to enable HP Software to help our customers resolve one of their critical pain points: controlling the increasing complexity and cost of managing the data center," Tom Hogan, senior vice president of software at HP, said in a news release. On a conference call to discuss the proposed acquisition, he added that the move should be seen as part of HP's strategy to become a leader in the software industry, particularly in data center management.

HP has been steadily expanding its business technology optimization (BTO) portfolio over the last couple of years through acquisitions, including the purchases of Mercury Interactive and Peregrine Systems. Including the Opsware planned acquisition, HP will have spent around $6.5 billion on BTO-related software, Hogan said. The vendor bought Mercury last year for $4.5 billion.

As with Mercury, there's "very little overlap" between HP and Opsware software, according to Hogan. Opsware's business has been largely focused on the Americas, so he sees plenty of opportunity for HP and its BTO partners to sell the software in Europe and Asia-Pacific. HP doesn't intend to sell Opsware software as a stand-alone offering, but will integrate it into HP's BTO software because that's what customers are looking for, Hogan said. Opsware has over 350 customers, according to Ben Horowitz, CEO and cofounder of Opsware. The company has mostly sold its software directly, but has one significant channel partner, Cisco Systems, which is also a strong indirect partner for HP.

After HP has closed the acquisition, the vendor expects to appoint Opsware CEO Ben Horowitz as head of its business technology optimization organization, reporting to Hogan. HP intends to take on all 550 Opsware staff, Hogan said, citing their expertise as key to the success of the acquisition.

Subject to regulatory approval, HP hopes to close the purchase before the end of October.

Opsware System software automates data center operations including provisioning, configuration and deployment. Co-founded in 2002 by Horowitz and Marc Andreessen, the company has its headquarters in Sunnyvale, California. Andreessen is the chairman of Opsware and famed for creating the Mosaic Web browser. He then co-founded Netscape and later was chief technology officer at AOL after the company purchased Netscape.

HP also announced plans Monday to acquire another company, thin-client and virtualization software vendor Neoware for around $214 million. Hogan said the timing of the two announcements was purely coincidental and that there may be some synergy between the technologies HP will gain from Opsware and Neoware in the area of client management.