A history of HP

The news that Hewlett Packard Development Company LP would lay down US$2.7 billion to acquire network switch maker 3Com Corp. not only causes industry watchers to look ahead at what could come of such a deal, but also reminds many of the IT vendor’s long history of billion-dollar acquisitions.


HP announced on Nov. 11 it would pay big bucks to add 3Com’s Ethernet network switches, routers and security products to its ProCurve business. This way HP will also be able to run its next-generation data centers on 3Com networking equipment. The deal also strengthens HP’s converged data center product portfolio vs. that of Cisco and its partners.




“It gives HP a core switch — a brand-new core switch,” said Steve Schuchart of Current Analysis of 3Com’s H3C 12500, which the company is pitting against Cisco’s Nexus 7000.


“It gives them a real platform to move forward with,” Schuchart said in an interview with Network World Senior Editor Jim Duffy, adding that the HP ProCurve 8212 and 5400 series switches didn’t really cut the mustard for core applications. “This is newer, bigger and a much more purpose built switch.”





About 18 months ago in spring 2008, HP announced it would invest $13.9 billion in exponentially expanding its global IT services business via the acquisition of Electronic Data Systems Corp. Aiming squarely at IBM, HP’s EDS buy pushed the IT vendor quickly up the list of services providers to land behind IBM as the second largest global outsourcing company worldwide. At the time, industry watchers speculated that HP not only wanted to enhance its services business but also potentially sell more data center equipment via outsourcing deals.



“IT services are a big and strategic part of the marketplace and they influence technology purchases downstream,” said Ben Pring, research vice president at Gartner, at the time of the deal. He explained that if IBM Global Technology Services is working with a client at the services level, there is more of a chance the customer will buy IBM technology. If HP can get its foot in the door with more services customers, hardware and software sales could follow.


“If HP had a bigger professional services umbrella and footprint, they would get greater access to a very strategic marketplace,” Pring said.




In 2007, HP paid what some industry watchers said was too much money for data center automation darling — and Marc Andreessen offspring – Opsware Inc. HP’s net gain included automation technology that could be applied to configuring and provisioning physical and virtual components across network, system, storage and application components in a data center. The acquisition was one of the first significant moves by one of the four market leading management software makers to incorporate broad automation technologies across their product portfolios.



“The next big step for the big four management vendors [BMC, CA, HP and IBM] is a move into automation in the areas of active configuration management and dynamic resource allocation. It will be a big disruptive play and a defining technology when they move into automation technologies,” said Will Cappelli, a research vice president at Gartner, in an interview with Network World at the time of the deal. “It will be more of a challenge for BMC and CA than for HP and IBM because the latter have server and storage technologies from which they can incrementally grow. BMC and CA will have to almost spring into the market with a fully shaped technology through acquisition.”


In fact, HP spending $1.6 billion for the automation software company had the indirect effect of upping the price for Opsware competitor BladeLogic,which BMC later acquired for $800 million.



Mercury Interactive


One of HP’s initial moves to broaden its niche network management software, known as OpenView at the time, into a larger IT management software suite involved paying $4.5 billion to buy application management vendor Mercury Interactive Corp. in 2006.



HP had been on a buying binge of sorts snapping up smaller management software makers such as Peregrine Systems, Novadigm and Consera Software, but those vendors didn’t promise the revenue increase that Mercury could offer, analysts said at the time. The technology Mercury offered addressed applications from development to quality testing to performance on production networks and would boost HP’s management play beyond its OpenView Network Node Manager and Operations products.


“None of those deals have been large enough to significantly impact HP’s software revenue. The Mercury acquisition really bumps up HP’s software business to where a significant portion of their revenue will now come from software,” said Rich Ptak, co-founder and principal analyst at Ptak, Noel & Associates at the time the acquisition was made public.


In 2005, HP reported net revenue of $1 billion from its software business. The Mercury buy was expected to increase that to more than $2 billion annually, according to HP. In 2008, HP’s software revenue had reached more than $3 billion.





HP’s bid to acquire Compaq in 2001 garnered much industry speculation and concern from customers, but ultimately the two companies came together with their separate computer, printer and server businesses for about $25 billion. With regulatory approval concerns, product support worries and what was tagged a “sour PC market” at the time, HP received much negative press surrounding its bid for Compaq.



At the time, Gartner suggested HP faced many challenges in terms of the respective companies’ business and how they might be spun out or eliminated to ensure success going forward.

“Both HP and Compaq depend on tactical partnerships with outside vendors to meet their customers’ software infrastructure requirements,” Gartner concluded. Gartner also said at the time that HP and Compaq didn’t have a strong track record in the software infrastructure arena, contrary to CEO Carly Fiorina’s assertion that the new HP will set the standard for innovation; and that HP will have to spin off its software businesses to take any kind of lead in the software arena.




In 1997, HP paid about $1.2 billion to acquire e-commerce and smart-card technology maker VeriFone to help customers in the financial services and other industries advance Internet-based business. The deal soon soured for HP, which reported less than five years later losing $48 million in its VeriFone software business. In 2001, HP sold its VeriFone assets to Gores Technology Group.

Would you recommend this article?


Thanks for taking the time to let us know what you think of this article!
We'd love to hear your opinion about this or any other story you read in our publication.

Jim Love, Chief Content Officer, IT World Canada

Featured Download

Related Tech News

Tech Jobs

Our experienced team of journalists and bloggers bring you engaging in-depth interviews, videos and content targeted to IT professionals and line-of-business executives.

Tech Companies Hiring Right Now