HP Concedes Buying Is Easier Than Building With Opsware Bid
In this consolidating software market, acquisition prices have been about four to six times revenue (including when HP acquired Mercury), yet HP has bid about 16 times Opsware’s 2006 revenue. Opsware is one of the few IT operations management suppliers left with a run rate exceeding $100 million. We believe that as HP sought to grow its software group revenue base, a bidding war with other would-be purchasers drove up the acquisition price. HP is finally conceding that purchasing configuration management software — the heart of its story for the optimized data center — makes more sense than building onto its own portfolio. Its earlier configuration management purchases (Novadigm and Consera Software) were unsuccessful in penetrating the server provisioning and configuration management market.
Opsware has aimed to enable end-to-end provisioning and configuration management for data center infrastructure. Its revenue breakdown is approximately 70% server-specific life cycle management tools, and 30% network management. It has sought revenue growth through acquisitions, including those of Tangram Enterprise Solutions, Rendition Networks, Creekpath System’s technology assets and iConclude (now Process Automation System - PAS), but it was never profitable.
HP will gain server and network provisioning, configuration management and compliance, as well as run book automation (which it needs to provide process automation and integration for its acquired and existing portfolio). Opsware was integrating its products through its own operational management data store; we believe HP will use its own configuration management database (CMDB) as its strategic integration point. Expect a product integration road map by the end of 2007, because HP can’t afford to lose Opsware R&D momentum for platform parity and compliance.
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