HP to buy Opsware for $1.6bn

Hewlett-Packard has extended its spate of software acquisitions with the $1.6bn purchase of Opsware, whose software is used to automate the operations of corporate datacentres.

The all-cash deal comes a year after its $4.6bn purchase of Mercury Interactive, HP’s first big acquisition since Mark Hurd took over as chief executive.

HP’s software business contributes only an estimated 4 per cent to its revenues, with about half of that coming from its HP Software division, which specialises in business technology optimisation and other high-growth parts of the business.

By comparison, IBM, which has also stepped up software acquisitions over the past year, generated about 20 per cent of its revenues in the most recent quarter, with just over half coming from its high-growth “middleware” products.

HP and IBM get the rest of their software sales from maintenance associated with older software products that are no longer showing growth, such as their Unix-based operating systems.

While Opsware’s revenues stand at only an annualised $100m, the high growth and profit margins in this part of the software business mean deals like this will eventually show through in HP’s overall growth rate and margins, said Thomas Hogan, head of HP Software.

The business was strategically significant for HP, he suggested, since having software that reduces the risk, complexity and cost of running datacentres put it in a strong position to sell other software and technology products to big corporate customers.

HP has agreed to pay $14.25 a share in cash for Opsware, a 39 per cent premium over its closing price at the end of last week.