HP, the dark horse of 2010

by Sharon Lobo    Dec 16, 2010

HP acquisitions 2010The year 2010 will go down in history as the year that saw numerous acquisitions in the technology space. Managing to break the shackles of recession, major IT firms in the US came out in full force acquiring companies in a bid to make up for their lost momentum. In this mad rush of buying out companies, one of the top 5 PC manufactures – HP (NYSE:HPQ), who managed to lap up 6 firms this year, has had an eventful year, which included the shocking acquisition of Palm and the protracted tussle with Dell (NASDAQ:DELL) for 3PAR (NYSE:PAR).

Let’s take a look at the stories behind HP’s acquisitions in 2010.

Palm Inc. (Acquired in April 2010)
HP inaugurated its buying spree this year, when it acquired ailing smartphone maker-Palm for $1.2 billion. This acquisition took everyone by surprise as HP who itself had failed to gain a foothold in the mobile space with its iPAQ range of handsets was now planning to revive Palm’s fortunes. However, HP claimed that rather than Palm, it was the Palm webOS that it was more interested in as it would give them a competitive edge in the ever growing smart device space. Though we are still to see this dream turn to reality, there have been rumors that HP will launch a webOS-based tablet in Q1 of next year. Only till such time we can just hope HP actually succeeds resurrecting Palm to its former glory.

Melodeo (Acquired in June 2010)
After Palm, it was Seattle-based Melodeo’s turn to join the HP clan. The primary motive behind this acquisition seemed to be HP’s attempt to take on Apple’s iTunes as Melodeo’s flagship product nuTsie competes with iTunes by enabling users to shop, download, and listen to music on their mobile phones.

Combined with Palm’s acquisition a couple of months earlier, HP can now build a complete ecosystem comprising of hardware, platform, and application store, much like competitors RIM, Nokia, and Apple. All this points to the fact that HP is seriously planning to position itself as a strong competitor in the mobile space.

Fortify Software (Acquired in August 2010)
After a acquiring two companies, which were not in line to its core business, HP turned its attention to Fortify Software, a California-based software vendor whose products protect businesses from the threats posed by security flaws in software applications. With the acquisition of Fortify, HP expects to offer a complete solution to help organizations reduce business risk, meet compliance regulations and protect against malicious application attacks.

Stratavia (Acquired in August 2010)
Within a span of few days of acquiring Fortify, HP struck again by acquiring Denver-based Stratavia for an undisclosed sum. Stratavia specializes in stack automation for physical, virtual, and cloud infrastructure. According to HP, these solutions will help its customers simplify application deployment and management in hybrid IT environments, which consist of on-premise, off-premise, physical and virtual environments.

3PAR (Acquired in September 2010)
The mother of all acquisitions this year was that of 3PAR by HP. This acquisition was all over the news considering the bidding and counter-bidding efforts between HP and Dell. It all started when Dell announced that it would acquire 3PAR for $1.5 billion and HP jumped in to the fray with its $1.6 billion counter-bid. Following HP’s offer, Dell raised its bid to $1.6 billion, which HP countered with its $1.8 billion offer. However, within hours of Dell managing to match this price, HP increased its offer to $ 2 billion. This time instead of only matching HP’s bid, Dell actually upped its bid to $ 2.1 billion. But, once again HP, with its too strong to resist bid of $ 2.35 billion managed to grab 3PAR. The final amount paid by HP was 10 times more than 3PAR’s revenue for 2009.

3PAR’s acquisition caused many to comment that HP had overbid for a company that had not made any profits since it went public back in 2007. If you too feel what made HP shell out this huge amount, the simple answer is cloud computing. With cloud computing gaining prominence by the day, HP did not want lose its share of pie in this space. As a provider of utility storage for both public as well as private cloud, 3PAR is important for HP as it gives the latter a competitive edge in the cloud storage space. By buying 3PAR, HP can now combine 3PAR’s virtualized storage solutions with its own, thereby offering an unparalleled storage, server, and networking portfolio.

ArcSight (Acquired in September 2010)
Post its acquisition of Fortify, HP felt that it further needed to strengthen its security offerings, especially in the cloud, and as a result spent $1.5 billion to buy ArcSight, an enterprise security management provider. HP believes that the combination of ArcSight’s security products and its own will provide businesses the ability to proactively monitor real-time events, assess risks and respond quickly to threats.

HP’s six acquisitions this year shows that the firm is determined be a strong player in the growing mobile and cloud space. While there are already established players in these segments, it will be interesting to see how HP manages to take on Android, Apple and RIM on the mobile front and CA and EMC in the cloud space.