HP plans to sell off middleware products

Hewlett-Packard Co. is about to sell off its middleware assets and exit the business, looking instead to partnerships to meet its customers’ middleware needs, HP executives said Tuesday.

The company plans to “retire” its middleware assets as part of an effort to attain profitability in its software division, Peter Blackmore, executive vice president of HP’s enterprise systems group, said Tuesday during a company meeting with financial analysts in Boston. He didn’t offer a timeframe for the move but said HP would provide further details by the end of the month.

Asked by an analyst if the plan includes selling HP’s Java application server, which it acquired in October 2000 from Bluestone Software Inc., HP Chairman and Chief Executive Officer Carly Fiorina said HP won’t provide concrete details until customer transition plans are in place. She acknowledged that the company is “engaged in some partner discussions” about its middleware strategy.

While HP wouldn’t say which products it plans to sell off, analysts said shedding its application server would make sense. BEA Systems Inc. and IBM Corp. hold by far the largest share of the market, according to most analyst estimates, and the products themselves are costly to develop, in part because vendors must keep their products in step with evolving Java standards.

Given that, it would make sense for HP to stop developing its own product and offer customers a third-party application server, said Rob Perry, a senior analyst at the Yankee Group in Boston. For customers who favor Java, HP could offer a product like BEA’s WebLogic application server, while for Microsoft Corp. customers it could offer an equivalent .Net product, he said.

Another analyst agreed that selling the Bluestone product is a likely move for HP, and also pointed to potential partnerships with Microsoft and BEA.

“I don’t know of a specific potential buyer, but I wouldn’t be surprised to see HP looking for someone to buy (its application server) because I think ultimately they intend to emphasize their relationships with their key software partners Microsoft and BEA, rather than emphasize their own,” said Mike Gilpin, a research fellow with Giga Information Group Inc., in an interview Monday.

Application servers provide a platform on which developers can build and deploy a variety of applications, for both internal functions such as payroll and external applications such as commerce and inventory software. They have become an integral component in the evolution of Web services, providing support for standards like XML (Extensible Markup Language) and SOAP (Simple Object Access Protocol).

Analysts and vendors say the market has become “commoditized,” however, meaning that many features, such as support for deploying Web services applications, have become standard. HP last year started offering a basic version of its application server for free with certain product bundles; Sun Microsystems Inc. followed suit saying it will soon offer its Sun ONE application server bundled with Solaris 9.

Aside from its application server, HP’s Netaction middleware suite includes its eSpeak services integration software and HP Process Manager. While HP wouldn’t say Tuesday exactly which middleware products in plans to retire, Blackmore’s brief remarks suggested that the move could be wide-ranging.

“We will retire the assets we have there and move to a partnered strategy,” he told analysts, adding that partly as a result of the move, HP’s software division may break even by the end of the calendar year.

HP’s software vision has been a work in progress for the past 18 months, Fiorina said, and the company is still engaged in an “ongoing evolution” of its strategy. She cited OpenView and OpenCall as two software products that are profitable.

(Stacy Cowley of IDG News Service in New York contributed to this report.)

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