HP to Acquire Fortify Software - Analyst Blog

Hewlett-Packard Co. (HPQ) recently announced that it will acquire privately-held software company Fortify Software. The company did not disclose the terms of the deal.

This acquisition will enhance HP’s product portfolio, and enable the tech major to serve its customers better by mitigating their business risks, maintaining the specification required for compliance regulations and by protecting them against malicious application attacks.

This acquisition integrates Fortify’s expertise in static application security analysis with HP’s application security analysis function, ultimately enhancing the level of immunity to end users’ security and application services.

The company has grown through strategic acquisitions. From 2007, HP has acquired a large number of companies, with the most significant being the purchase of EDS for approximately $13.9 billion. The company’s Technology Solutions Group (TSG) shifted its outsourcing services operations and a part of its consulting and integration activities to EDS.

The EDS acquisition has provided the services portion of the TSG business a stronger foothold to compete against its largest rival, International Business Machines (IBM). Moreover, services have contributed the largest chunk of HP's revenue following the EDS acquisition.

The company also acquired networking major 3Com for a total consideration of $2.7 billion. This acquisition helped HP challenge networking leader Cisco Systems Inc. (CSCO), especially on the server side of the business.

Moving ahead, the company expects revenue for the third quarter to be flattish sequentially, although management was more positive for fiscal 2010. Despite the company’s market position and compelling product line, we remain cautious about growth in the second half, especially on the consumer side. We also view negatively the departure of CEO Mark Hurd, since retention of key personnel in the increasingly competitive market is a must in our view.

We have a short-term Zacks #3 Rank ('Hold') rating on HP's shares.
 
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