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HP splashes out on software acquisitions

HP plans to acquire SRM startup AppIQ and IT asset management company Peregrine Systems for a combined total of over $700 million, according to sources.

Hewlett-Packard Co. (HP) has signed a definitive agreement to acquire storage resource management (SRM) software company AppIQ Inc., in a deal worth approximately $300 million, according to analyst speculation. The official financial terms of the transaction were not disclosed.

HP also announced the acquisition of Peregrine Systems Inc, for $425 million in cash, adding IT asset management to its OpenView management software portfolio. Both deals are an aggressive move by HP to stave of increasing competition.

"These acquisitions reinforce HP's belief that unified management of IT is the No. 1 issue for CIOs today," said Frank Harbist, vice president and general manager of ILM and storage software at HP. "It's a huge competitive differentiator: No one else has unified storage, server and software management."

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HP kills OpenView SAN manager, OEMs AppIQ

HP dropped its own proprietary SAN management software, OpenView Storage Area Manager (OVSAM) in February, in favor of reselling AppIQ's SMI-S-based Storage Authority product line. HP is migrating its 4,000 or so OVSAM customers to AppIQ's software, over time, based on user preference, the company said.

AppIQ's Storage Authority suite, which HP calls Storage Essentials, replaces proprietary device managers and point tools with a single management product that works with all vendors' hardware that supports SMI-S.

AppIQ had won OEM deals with Hitachi Data Systems, Sun Microsystems Inc, Engenio Technology Inc. and Silicon Graphics Inc (SGI) based on its commitment to this standard.

"Locking up that number of OEMs is tantamount to winning the game," said Arun Taneja, founder and consulting analyst with the Taneja Group. "I would not be surprised if it went for upwards of $300 million."

Competition brewing

In the storage marketplace, "EMC has made it obvious it is going after the network management and systems management market," said John Webster, founder and analyst of Data Mobility Group. "Assuming this was threatening HP's territory, specifically its OpenView software business, these acquisitions strengthen HP's hand versus EMC."

IBM was interested in AppIQ but failed to make a move as it thought the startup was asking for too much money, according to Webster. "They wanted north of $300 million," he said. Webster said he believes AppIQ was in no rush to sell. "If they were looking for that price, they in all likelihood got it."

Analysts say the move will have interesting implications for App's remaining OEMs.

"These companies have lost a march on HP now … If it's a revenue stream for them they will continue to use it, but given a choice companies would rather not put money into the coffers of a competitor," said Michael Karp, analyst with Enterprise Management Associates. He said it might mean that other startups in the SRM space like Crosswalk Inc. will get more play now.

He added that the acquisition is a "very aggressive move by HP that emphasizes the company's commitment to standards … HP is taking a leadership role in storage management."

Commitment to interoperability

A large part of AppIQ's success has come from its rigid commitment to SMI-S, making it interoperable with all storage hardware that supports that standard.

"Naturally, they will take HP first in their approach to testing," Karp said. "But to maintain the level-playing field so that they remain the provider of choice for SNIA interoperability testing, they must stay committed to working with everyone."

Headquartered in Burlington, Mass., AppIQ has 135 employees, approximately 250 customers and offices in the U.K., Hong Kong, Singapore and India.

The transaction is subject to certain closing conditions and is expected to be completed within approximately 45 days. Following completion, the business will be fully integrated into the StorageWorks division of HP's Technology Solutions Group.

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