Hewlett Packard has announced that it is to acquire thin client computing specialist NetWare for $214m net of cash, putting it within striking distance of the lead in the market for client-server desktop computing devices.
HP is paying $16.25 per share for King of Prussia, Pennsylvania-based Neoware, adding the company’s Linux- and Windows-based thin client hardware and software to HP’s own Windows XPe- and Windows CE-based devices.
HP said it plans to integrate Neoware into the Business desktop Unit of its Personal Systems Group and the acquisition will see it move practically level with market leader Wyse in terms of market share, according to IDC figures.
In the first quarter of 2007 the research firm gave Wyse 33% share, HP 19.2%, and Neoware 12.7%. HP said the acquisition will also boost its Linux software, client virtualization and customization capabilities, as well as its regional sales footprint, and talked down the competition with Wyse.
Our focus near term is to take the care of the customers Neoware has and HP’s customers, said Kevin Frost, VP of business desktops for HP’s Personal Systems Group. We’re not too focused on Wyse. They’re a strong competitor, and I expect them to be in the future, he added.
It also remains to be seen what impact HP’s acquisition of Neoware will have on the latter’s relationships with IBM and Lenovo. Neoware became the preferred supplier of thin client technologies to IBM and its clients in 2002 through an agreement in which it licensed IBM’s thin client technologies.
Neoware has retained its status as IBM preferred thin client vendor despite the sale of IBM’s personal computing division to Lenovo in 2005, while it also struck a global strategic partnership with Lenovo following that acquisition.
Neoware’s president and CEO, Klaus Besier, talked down the importance of those vendors to Neoware, although admitted that there are certainly relationships that will maybe not be as strong as previously.
Overall revenue generally through that [Lenovo] relationship has been declining, he added. IBM has not been so significant, there are some deals with Global Services, but IBM is not really reselling our product.
Stephen Yeo, worldwide strategic marketing director at German thin client vendor Igel, predicted fallout from this consolidation given that HP’s acquisition of IBM provided an opportunity for Neoware’s rivals to exploit.
There are two remaining dedicated thin client players of clout, he argued. One is [market leader] Wyse, but they sell their own streaming applications and so could to some extent be a competitor, and the other is Igel.
The other potential impact he expected from the acquisition was that it would lead to a consolidation in the channel, as Neoware resellers face competition from HP’s own channel partners. Again, Igel, like every other thin client vendor left standing, can be expected to contact Neoware partners to try to attract them to its camp.
HP’s Frost said he did not expect any impact on the go-to-market strategy for either company’s products, and insisted that HP would be focused on maintaining the relationship with Neoware’s existing channel partners.
Neoware grew its business and global footprint through a series of acquisitions in 2004 and 2005, spending $48.2m one six acquisitions in just over a year. That helped the company grow revenue 36% to $107.2m for fiscal 2006, ended June 30, 2006.
That was the last time the company reported quarterly revenue growth, however, as a reliance on a small number of big customers began to cost the company dear. Revenue was down 18.5%, 18.8% and 20.5% in the first three quarters of fiscal 2007 respectively.
Our results this quarter reflect our planned transition from dependency on several large enterprise accounts to a broader, more sustainable revenue model, commented Besier at the end of the third quarter.
Regarding the respective portfolios, while most of them will reveal overlap, Neoware’s strength is in Linux, while HP’s is in Windows, though each do offer the other operating system.
In terms of the hardware, perhaps the one area where Neoware has something HP doesn’t is in portable thin clients. Neoware introduced its m100 mobile thin client in March, and while HP was planning to develop an alternative for launch later this year, it does not now need to. It was one of the reasons for HP to do the deal that we have an offering in that area, said Besier.