HP Buys Peregrine With Eye on Enterprise Management

In one of the first major moves since announcing a sweeping restructuring that followed the hiring of a new CEO, Hewlett-Packard (NYSE: HPQ) said it would buy Peregrine Systems (Nasdaq: PRGN) in an all-cash deal worth US$425 million.

The acquisition gives HP access to Peregrine's highly regarded portfolio of information technology asset management software, which is designed to help high-level executives better control technology across vast enterprise networks.

HP is paying more than $26 in cash per share for Peregrine, a 37 percent premium over Friday's closing price.

A New Direction

The acquisition was the larger of two announced almost back-to-back by HP today. The tech giant also said it had scooped up AppIQ, a provider of open storage area network management and storage resource management software. Burlington, Mass.-based AppIQ, which is privately held, makes products that help enterprise customers manage servers and storage and has about 250 customers, mostly large enterprises.

HP said it would integrate Peregrine's products into its OpenView portfolio of IT management tools, which are meant to help give an overview of technology assets from a single place. The tools are meant to reduce the cost and complexity of maintaining complex enterprise setups.

Analysts said the deal was significant not because of its size but because it may indicate where CEO Mark Hurd may point HP going forward as he tries to make the company a force again in the tech world.

Logical Fit

HP said its Peregrine buy would make it a leader in the market for asset management software, a category expected to be worth $1 billion within three years.

"Peregrine will help HP deliver a more complete management software solution to CIOs and enhance their ability to manage their IT assets," said Ann Livermore, executive vice president, Technology Solutions Group at HP. "Companies constantly look for ways to lower their technology costs, from the PC to the data center. Our strategy is to enable CIOs to manage the technology environment in an efficient and cost-effective manner."

The moves also fit with HP's recent strengths in its earnings. Its most recent quarterly report showed strength in the server and storage area.

S&P analyst Megan Graham-Hackett said the deal appeared to be a "strategic positive."

"We believe Peregrine's software for asset tracking and process automation will be a good addition to HP's software portfolio, but we see successful integration as key, and strides in improving profitability in this segment as critical," she wrote in a research note. She said the deal was not significant enough to prompt S&P to raise its rating on HP from a hold, however.

Watching Closely

Investors and analysts are watching HP closely. Since the ousting of Carly Fiorina and the subsequent hiring of Hurd, a known cost-cutter.

In July, Hurd announced his massive reorganization plan for HP, one that included some 14,500 job cuts that could save HP as much as $1 billion a year in the long run.

Hurd has also shown a willingness to purchase small firms to expand its menu of technology. In August, HP bought Scitex Vision to add to its printing business. The purchase of AppIQ may also fall into that category, giving HP some strong technology in the storage-management area.

Others, including Microsoft (Nasdaq: MSFT) have found success with rolling up smaller firms that have strong technology. In some cases, those firms have valuable intellectual property (IP) but not the visibility or platform to reach a large audience, said Enderle Group principal analyst Rob Enderle.

"Larger firms realize they don't have to develop all of their own technology and that for relatively little money, they can add to their IP portfolios," Enderle said.