HP Chomps AppIQ & Peregrine

Hewlett-Packard Co. (NYSE: HPQ) has acquired storage resource management (SRM) startup AppIQ Inc., as it attempts to rapidly rebuild its storage portfolio through technology partnerships (see HP Buys AppIQ).While the price for AppIQ wasn't disclosed, several sources say the selling price was above $200 million. HP expects the AppIQ deal to close within approximately 45 days. AppIQ will become part of the StorageWorks division of HPs Technology Solutions Group.

Also today, HP revealed plans to buy IT asset management software company Peregrine Systems Inc. (OTC: PRGN.PK) for $425 million.

Although Peregrine does not sell storage software, HP's vice president of ILM, Frank Harbist, says today’s two deals are related because they fit into an overall strategy of integrating the monitoring and management of IT infrastructure. Last month, EMC Corp. (NYSE: EMC) followed the same trend when it announced plans to expand into network resource management (see EMC Casts Wider Net)

The AppIQ acquisition comes seven months after HP agreed to sell AppIQ software through an OEM deal (see HP OEMs AppIQ SRM). The seven-year deal, announced in February, included plans to collaborate on future development. HP has included AppIQ’s auto-provisioning feature in its HP Storage Essential SRM product since March and expects to offer full integration next month.

Back in February, HP identified auto provisioning and AppIQ’s embracing of open standards as its most important features. Harbist reaffirmed that assessment today. He describes AppIQ’s StorageAuthority suite as “best-in-class SRM. It adheres to standards and ups the ante from passive monitoring to active provisioning and management.”Auto provisioning lets users set policies for allocating SAN capacity between storage devices according to pre-set policies based on factors such as geography, application, and business unit. These policies take effect when new devices are added to the SAN.

AppIQ also has OEM deals with HP rivals Hitachi Data Systems (HDS), LSI Logic Corp.’s (NYSE: LSI) Engenio division, Silicon Graphics Inc. (SGI) (NYSE: SGI), and Sun Microsystems Inc. (Nasdaq: SUNW). (See AppIQ & Engenio Join for Software, Sun Shines on AppIQ, and HDS Expands Software, Services). Harbist says HP hopes to continue those OEM deals.

The OEM model has worked well for Burlington, Mass.-based AppIQ. The company claimed 250 customers as of the end of July, double the amount it had at the end of 2004. Founder and CTO Ash Ashutosh says AppIQ expected to be profitable by the end of the year. He would not say if there were other suitors for AppIQ, but industry sources say Hitachi and Sun expressed interest in acquiring the startup.

Harbist says he expects to keep as much of AppIQ’s development team as possible, as well as Ashutosh and “a vast majority of the management team.” He says AppIQ CEO Dave Lemont will stay through the transition, and then HP “will decide at that point what we will do with Dave.”

HP is hoping the acquisition breathes new life into its SRM revenues, which decreased 16.4 percent last quarter from the previous year, according to IDC. HP's total SRM market share fell from 8.6 percent to 6.8 percent over that period -- fourth, behind EMC (49.9 percent), Symantec Corp. (Nasdaq: SYMC) (11.1 percent), and Computer Associates International Inc. (CA) (NYSE: CA) (6.9 percent).HP has aggressively moved to revamp its storage story since bottoming out midway through 2004 (see HP Storage Slammed). This year it has upgraded its EVA midrange SAN platform and added enterprise NAS, wide-area file services (WAFS), virtual tape library (VTL), storage and database archiving, and data protection, mainly through OEM partnerships with Microsoft Corp. (Nasdaq: MSFT) and startups Asigra Inc., OuterBay Technologies Inc., PolyServe Inc., Riverbed Technology Inc., and Sepaton Inc. (see HP Hoists New Storage Products and HP Bundles Up With MS).

While competitors say HP’s partnering strategy shows a lack of innovation, at least one industry analyst credits the company for moving quickly to patch weaknesses.

“HP is getting very aggressive, and HP and aggressiveness had been considered a contradiction in terms to a lot of people -- including me,” says Arun Taneja of the Taneja Group. “HP found itself with a lot of missing pieces after going into a vacuum for about two or three years, but it’s been banging away on all cylinders over the last six months.”

— Dave Raffo, Senior Editor, Byte and Switch