July 23, 2007
Hewlett-Packard to Acquire Opsware for $1.6 Billion
Bloomberg.com
 
Hewlett-Packard Co. will buy Opsware Inc., the company founded by Internet pioneer Marc Andreessen, for about $1.6 billion to extend its push into business software. Opsware shares rose 36 percent, the most ever.

Opsware, founded in 1999 by Andreessen as Loudcloud, makes software that manages data centers for more than 350 clients, including JPMorgan Chase & Co. and Target Corp. Andreessen, the co-founder of Netscape Communications Inc., would get $138 million for his Opsware stake, based on the latest proxy filing.

The purchase brings Hewlett-Packard's spending on software in the past two years to more than $6.5 billion amid an effort to bolster the unit, whose revenue growth is outstripping gains in others such as storage and servers and printers. The company has added application makers such as Mercury Interactive Corp. and Peregrine Systems in that time.

``The acquisition is a nice strategic fit with Hewlett- Packard's software portfolio,'' said Brian Alexander, an analyst with Raymond James & Associates in St. Petersburg, Florida. ``It enhances H-P's overall attractiveness as a hardware, software and services provider.''

The per-share price of the cash bid is $14.25, Palo Alto, California-based Hewlett-Packard said today in a statement. That's 39 percent more than Opsware's closing stock price of $10.28 on July 20.

Opsware shares climbed $3.72 to $14 at 4 p.m. New York time in Nasdaq Stock Market trading. Hewlett-Packard shares fell 11 cents to $48.43 in New York Stock Exchange composite trading.

Andreessen's History

Andreessen, Opsware's chairman, helped develop the first Internet browser and was technology chief at Netscape. According to Opsware's latest proxy, he owned about 9.7 million shares as of May. Opsware spokesman Kevin McGuirk couldn't immediately comment on the current size of his stake.

Andreessen developed the prototype for Mosaic, the first version of the Internet browser to view and display Web pages, which was renamed Navigator and sold commercially.

Netscape helped spark the IPO boom for money-losing Web companies. Its shares more than doubled when they first began trading in August 1995 and the company grew from a startup to a $10 billion empire before being bought by America Online Inc. in 1999.

In a post on his blog today, Andreessen, 36, said the Opsware purchase will help Hewlett-Packard lead sales of software as part of ``the huge Internet buildout of the next 10 years.'' He won't have an operational role at Hewlett-Packard, according to Jean Kondo, a spokeswoman for the company.

Horowitz's Gains

Opsware Chief Executive Officer Ben Horowitz, 41, stands to get about $85 million for his stake. He will become a manager at Hewlett-Packard's software business.

Hewlett-Packard's latest acquisitions have given the company more security software and programs that analyze and test computer systems. Opsware gives Hewlett-Packard software that automates management of server computers that run networks and Web sites, where the company lacked programs, Alexander said. He rates Hewlett-Packard ``outperform'' and owns 2,000 shares of Sunnyvale, California-based Opsware.

Separately, Hewlett-Packard said today that it agreed to buy Neoware Inc., a King of Prussia, Pennsylvania-based software maker, for about $214 million, or $16.25 a share. Neoware's software lets companies centralize the management of desktop computers.

Full Price

Hewlett-Packard is paying a ``full price'' for Opsware, CIBC World Markets analyst Brendan McCabe wrote in a note to clients today. The value of the offer probably will deter other potential bidders because there are plenty of companies in that market, said McCabe, who is based in New York and rates Opsware a ``sector outperformer.''

The offer price values Opsware at more than eight times its estimated fiscal year 2009 sales and more than 55 times its estimated earnings, McCabe wrote. Google Inc. trades at about 34 times projected 2007 profit.

Opsware's loss in the first quarter ended April 30 widened to $10.6 million. Sales rose 29 percent to $28.3 million.

Revenue at Hewlett-Packard's software unit rose 58 percent in the second quarter, the company said May 16. That compared with 8.3 percent growth in the storage and servers unit, and a 6.5 percent increase for imaging and printing.

``This is another demonstration of H-P's commitment to being a global leader in software,'' Thomas Hogan, senior vice president at Hewlett-Packard's software business, said in an interview.

Hewlett-Packard expects to complete the purchase before the end of its fiscal fourth quarter of 2007. Goldman, Sachs & Co. provided financial counsel to Opsware on the deal, while JPMorgan Chase & Co. advised Hewlett-Packard, according to an e-mail from the computer maker.