HP Mergers & Acquisitions: Who’s Next?


Independent Consultant,

By design or by chance, HP is poised to become the world’s most complete supplier of end to end IT infrastructure and business software. The addition of 3Par and Palm extends the firm’s range from high-end storage solutions down to a complete line of handhelds and smart phones. What is missing is software to tie it all together. We thought it would be fun to guess who might be next on HP's M&A agenda. Before we go share our predictions, let’s put this in context by looking at a graphical illustration of HP's recent M&A activity.


HP Historic MA Activity


There is an elephant in the room. As HP contends with public relations fallout from previous CEO Mark Hurd and first quarter drops in two of its largest divisions, New CEO Léo Apotheker needs some success. His previous firm, SAP, could be a very good acquisition for HP for the following five reasons.

  1. Leadership: Before Apotheker was CEO at HP, he was forced out as SAP’s CEO. He is intimately familiar with the synergies between the two firms. In addition, there is always the allure of a little payback.
  2. Oracle: The HP-Oracle relationship has deteriorated steadily since Oracle’s acquisition of Sun Microsystems in 2009. Oracle hired Hurd after his release from HP; HP responded in court. Although the two firms reaffirmed a commitment to a long-term partnership via joint press releases in September 2010, Oracle CEO Larry Ellison has since thrown down the gauntlet. In December 2010, Ellison announced a new computer line that would compete directly with HP servers. An SAP acquisition would allow HP to respond on Oracle’s home turf.
  3. Politics: February’s announcement that the Duetsche Boerse has been in talks to acquire the New York Stock Exchange raised political issues, among others. The acquisition of a major German firm by an American holding could relieve some of that pressure.
  4. Fit: The addition of a premiere enterprise software suite to HP’s line of hardware would make the organization truly a one-stop shop for enterprise IT.
  5. Geography: SAP’s North American headquarters is in Newtown Square, PA. HP has major installations in King of Prussia, PA (literally up the street) and in Paramus, NJ, only 120 miles away. SAP and HP jointly run the SAP-HP Competence Center in Wallorf, Germany next to SAP’s world headquarters.

The first barrier to such a partnership is that SAP has stated as recently as March 2011 that it is not for sale. It would also have to pass regulatory muster in both the European Union and the United States. Still it makes a lot of sense for both firms with the mostly likely timing would be in 2012.

As HP expands its enterprise software suite, a key component should be an enterprise database solution. HP’s ability to deliver high end workstations and storage provides an enterprise-level platform. Conventional relational databases, including Oracle and SQL, are not the future. One of the compelling reasons for relational databases is to reduce storage requirements by minimizing data reducing. This was valid when storage prices were high but with street prices for terabyte drives as low as $60, the price of storage is no longer a consideration.

HP would do well to position itself for the post-relational world by acquiring expertise for a next-generation database. 10gen has experience in developing, installing, and supporting the open source database MongoDB, which would position HP well as both a database software provider and as a cloud-based database services provider. HP desperately needs an enterprise database solution. Expect a move in 2011.

Business Intelligence
Whether an organization has actual or virtual IT infrastructure, it always has actual business concerns. The key to good management is timely access to appropriate and accurate business intelligence. SAS CEO and co-founder Jim Goodnight turned 68 in January 2011. While to all reports he remains in robust health physically and mentally, he has to be concerned with long-term viability for SAS. The SAS culture of social responsibility would be a good fit with HP’s culture and the product line would extend HP’s capacity to provide transparency for client’s IT and business operations.

Should SAS, the world’s largest privately held software firm according to Forbe’s, be too much to take on, there are smaller alternatives. Microstrategy has had a partnership with HP for more than decade and has a solution set optimized for HP technology. SAS is a long shot and would be an expensive purchase; if it occurs it would be in 2013 or later. Microstrategy is more likely and the potential to be more immediate; late in 2011 is a likely time.

HP has made several investments in large format printers over the past decade. However, the software to drive them is limited to a few verticals and a lot of third parties. An excellent strategic investment for HP would be Autodesk. The graphics company saw fourth quarter profits rise 23 percent. Its cache of design software would both leverage HP imaging hardware plus further HP’s 3D visualization. Autodesk would be a good target for 2011.

Medical Imagining
HP has moved aggressively in healthcare. A February announcement introduced HP Digital Health solutions to help healthcare organizations to become “Instant-On Enterprises.” While the announcement focuses on overall enterprise solutions, it demonstrates HP’s commitment to the sector. One area where HP needs an investment is Medical Imaging. It already provides networking, workstation and storage solutions supporting healthcare Digital Communications in Medicine (DICOM) standards

Hermes Medical Solutions, based in Stockholm, provides solutions across a variety of medical disciplines from cardiology to veterinary scintigraphy. The acquisition would expand Hermes’ presence in the Americas, solidify HP’s presence in European healthcare, and provide a daunting hardware/software solution set to the marketplace. An HP acquisition of Hermes would be strong move in 2011.

Consumer Multimedia
On the consumer side, HP has focused on multimedia services acquisitions such as Snapfish in 2005 and Melodeo in 2010. Corel Corporation has photo editing and multimedia authoring tools that would round out HP’s offering on the desktop, easing transition to the cloud. Ironically, the WordPerfect Office portion would have little value to HP and could be spun off to a separate entity, which is how WordPerfect started back in 1981. HP needs to beef up its consumer offerings; Corel would be strong addition in 2011.

Network and Systems Management
HP Business Technology Optimization (BTO) solutions are built upon HP’s OpenView technology for network event and performance management. The firm’s solutions have expanded over time to include application management and service desk. The solution set offered by CA Technologies melds very well with all of the enterprise IT hardware offered by HP in addition to instrumenting the enterprise software such as that offered by SAP. Furthermore, the command and control features of the married product lines can be easily extended to cloud-based operations. There are alternatives to CA Technologies as well. Both Software AG and BMC are viable alternatives although neither would be as complete a solution as CA. Of the three, CA is most likely but it is doubtful that BTO would be the acquisition in a building year. Look for HP to make a purchase in 2012.

With last year’s purchase of Palm, Inc, HP became the only hardware manufacturer that provides systems from handhelds to high-end servers. From Web-OS to HP-UX 11i, it also owns operating systems for all of its computers except those that run on Windows. While HP has supported Linux for years, it has always been a sideline business. Bringing a company like Red Hat into the fold would give HP the ability to control operating systems that cross its entire hardwire line. Of course, Windows would remain an option for AMD and Intel powered PCs. This should be a priority for HP and if it occurs, sooner is better.

There are three possible targets that would integrate so pervasively into HP that they can only be categorized as Corporate acquisitions. These are:

  1. Adobe: In the post-relational database environment, the document rules. And Adobe rules the document. While PDF is now a standard, Adobe’s document handling infrastructure allows enterprises to bundle a document’s context with its content. This would be large acquisition that could start with a defined partnership in 2011 and culminating with a purchase in 2013.
  2. Symantec: HP has invested in security technology. But Symantec would give them both desktop and enterprise security solutions that cover almost all of HP’s computing hardware. HP needs a more comprehensive security suite by the end of this year.
  3. VMWare: In the grey area between glass rooms and cloud computing is virtualization. VMWare supplies software that makes a single physical server appear to be several virtual servers. Virtualization can increase security and ease management for individual applications or user classes. The firm would be a good candidate for HP this year.

Some Assembly Required
With all of these components, HP becomes the only firm that can supply end to end enterprise IT, including hardware and software, either on premises or under the Infrastructure as a Service model. HP could supply all of the IT hardware, including smart phones, handhelds, desktops, workstations, and servers. The expanded BTO offerings allow complete control and situational awareness of the enterprise’s computing and communications systems. The enterprise business software would track, well, all of the business stuff. HP can leverage its existing business continuity sites to jump start an Infrastructure as a Service offering. Adobe technology would allow enterprises to encapsulate business processes within documents and 10gen would store it all. Autodesk, Hermes, and Corel would drop directly into their respective business units.

What do you think?
When do you think HP will acquire the mentioned companies?

  • Tim

    Analytical databases (OLAP) are an application, an island. Transactional databases (OLTP) are an ecosystem including tools, apps, consultants, etc. MongoDB isn’t an ecosystem and won’t be for a very long time. MySQL is a leading ecosystem already and it is open source. HP would do better to coopt MySQL by acquiring MariaDB, SkySQL and a storage engine like ScaleDB. This would give them a combined solution that is business class, cloud-ready and taps into the second largest OLTP ecosystem.

  • Anand

    SAP is too big to chew on for HP. SAP’s Market Capitalization followed by its niche acquisitions in the past commands a premium value in the market.

  • Daniel

    You forgot the Positivo Informatica, a leading manufacturer in Brazil. Follow the link from Bloomberg:


  • http://www.siliconvalleywatcher.com/ Tom Foremski

    Not SAP, the money is in SAP services not license revenues.

    You don’t have Tibco on your list.

    Also, what about a merger with Oracle? The synergies would be excellent and it comes with Sun, that would make a mega IT company, a West Coast match to IBM.

  • http://about.me/cliveb clive boulton

    HP’s had sand kicked in its face, the prospect of further market humiliation concentrates the broad to make game changing acquisitions. VMWare or SAP fit the bill.

  • Abdulkarim

    I dont think that HP will acquire Autodesk because as Im seeing Autodesk itself believe in Acquisition. Autodesk announced on march 11 about the completion of the acquisition of Blue Ridge Numerics, Inc. And its acquiring many small companies time to time.

  • http://www.wohl.com Amy Wohl

    This is way too ambitious. Lots of companies that are too big for HP to reasonably buy (starting with SAP). Imagine if they somehow bought them all: how on earth would they integrate them together? HP would be better off buying one something big and important (say BMC or VMWare) and than surrounding it was organic development, smaller acquisitions, and ecosystem building.

  • http://kpn320.blogspot.com Prakash Narayan

    Leo Apotheker made it quite clear in his speech yesterday that HP does not need to own a big transactional application platform. This rules out a possible SAP acquisition.

  • James Border

    Hewlett-Packard (HPQ) executives made it clear Monday that it will go shopping to fill in software gaps in three clear areas: Analytics, security and platform as a service. Backup and Security is big HP requirement. Which is a company that has best backup and secuirty software?

  • http://cliveboulton.com clive boulton

    “Analytics, security and platform as a service” => Rackspace / Joyent / (Yahoo)

    Still fancy HP+SAP, apps move the services needle. (8:1 leverage as @tomforemski discusses)

  • Big Data Fan

    “HP would do well to position itself for the post-relational world by acquiring expertise for a next-generation database… HP desperately needs an enterprise database solution. Expect a move in 2011.”

    HP already made a move in this space exactly one month prior to the publishing of this article by acquiring Vertica:


  • http://bibongo.wordpress.com/ jon

    Now just watch as HP screws up Vertica just the same as with Neoview. More soon on my blog above

  • T

    No mention of Vertica? That is your missing link on this analysis. Vertica had huge wins at AOL and Groupon this year for data analytics. No need for SAS.

  • Tom

    I do not believe in HP buying SAP or Oracle or any other big one. They rather buy smaller and more innovative companies in the area of analytics and cloud services,…

  • Chelsea McDonald

    HP now has a “software” CEO and has risen to become the “number one technology” company when it a number of areas. Investors and the market want them to move to the next level. This occurred with Compaq when they were in the same position and acquired DEC. I am convinced they will make a “large” acquisition.

    Symantec would provide Norton Antivirus and End Point Protection to the consumer market. HP has the platform to deliver.

    In the enterprise you have NetBackup and DataProtector and an acquisition would put them solidly in the lead.

    On information management, a strong play with 3Par and iBrix, Symantec leads with Enterprise Vault. Couple this with storage HP offers. As well as virtualization (HP delivers more virtualized servers than anyone) and with VirtualStore and Cluster and it’s a perfect match.

    Security is what Symantec is all about. HP suffers and this would round out HP’s enterprise offerings.

    The need, the fit, the criteria for large acquistion even with 13B+ market cap and Symantec’s lack luster stock prices underperfoming makes it work.

  • hopefortheast

    I hope people will not be mad at me. I think big IT companies like HP has past its time. Like HP I mean big IT companies that mainly provide hardware to gain their biggest chunk of the revenue. In 10 years time hardware will be already available like construction materials. You just need people to assemble it. In the future, people and smaller companies will be smart enough to assemble them. And there will be many independent contractors that specialized in assembling them. What SME need are services like the cloud and softwares and consumers need fancy products. Unless HP make it big time in the cloud, software and in the consumer market, I see a company in decline.

  • Blackmagic01

    Why is Palm under imaging & printing and not in the personal systems group?

  • SAPJoe

    SAP has some database technologies, so going after SAP would fill that niche as well as position them as being on par with IBM & Oracle. It also gives a potential PaaS for offering completeness.

    What about SFC?

    While I agree with other posters that it shouldn’t be where/what they are concentrating on, it doesn’t mean that they won’t go this route.

  • J Chavez

    WAY to much bias pro HP …

    “HP is poised to become the world’s most complete supplier of end to end IT infrastructure and business software. ”

    “What is missing is software to tie it all together.”
    Just software, oh well, is that all? That’s easy, right?

    Over the same period of time IBM made +100 acquisitions.

    You can rule out 10gen, Adobe, Autodesk, and Corel, they makes no sense, let MS to swallow them later.

    BMC or CA Technologies pick one, CA seems better expensive at 11B + premium though

    Symantec kind of make sense as a source of revenue stream

    Hermes Medical Solutions no idea
    Microstrategy, SAS they just got Vertica, so unlikely in the short them and must likely Oracle will get either one of them very soon.

    Software AG they need it definitely so makes a lot of sense

    VMWare, isn’t EMC’s already? so? All EMC or just convince EMC to sell them VMWare?

    HP has to be more aggressive, otherwise; well imagine MS getting HP and joining Oracle vs IBM fight.

  • Rich

    Rackspace. Team up with Microsoft to create a Super Cloud – HP with the efficient infrastructure and Microsoft plus other partners with the cloud apps.. then start to build regional “edge clouds” that are all interconnected. Menu selection of software running in the cloud.

  • http://www.webling.com/ Web apps

    Hi everyone this very nice post and comments as well thanks to share about software.

  • D D

    You forgot to mention Autonomy :0) 

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