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Log Management: Article

HP Buying ArcSight for $1.5b

The company, which monitors corporate networks for suspicious activity, earned $28.4 million in its fiscal year ended April 30

HP confirmed Monday morning that it means to buy ArcSight, the 10-year-old anti-hacking house, for $43.50 a share or around $1.5 billion all told, a 24% premium for a company that it reputedly wanted to buy for $800 million a couple of years ago before it went public.

Since the unconfirmed report in the Wall Street Journal Sunday afternoon suggested an auction, the punters bid ArcSight's stock price up over the $43.50 HP said it's going to pay, hoping for a repeat of the 3PAR run-up.

The Journal said it heard ArcSight was shopping itself around to a bunch of big technology companies and looking for $42 a share. It was at $28 on August 26 when the paper first reported it was for sale and closed Friday at $35.10.

During an early morning conference call Bill Veghte, the ex-Microsoftee now running HP's software unit, refused to speculate on the chance of another bidder coming forward.

He also wouldn't comment on whether HP's overpaying for growth and whether its tight-fisted former CEO Mark Hurd, now gone to Oracle, would have countenanced the ArcSight premium on top of the $2.35 billion it's paying for 3PAR.

Hurd reportedly didn't want to pay more than $750 million for 3PAR and passed on trying to outbid Dell when he was still at HP and the price was still at $1.15 billion. HP is also carrying $5 billion in debt and promised to buy back another $10 billion worth of its stock - on top of the $4.9 billion still to be used for that purpose - to make up for the thrashing it's taken since it ousted Hurd. It has $14.7 billion in the bank although all of that is now theoretically spent.

At least ArcSight, unlike 3PAR, is profitable.

The company, which monitors corporate networks for suspicious activity, earned $28.4 million, up from $9.9 million, on revenue of $181.4 million, up 33%, in its fiscal year ended April 30. HP said it is growing at the rate of 40% a year with double-digit operating margins and has a reportedly thousand customers including HP-style Fortune 100s and 1000s.

HP said it expects the acquisition to close by the end of year and not dilute its earnings.

Veghte said HP would combine ArcSight's real-time view of security events with its own view of corporate resources.

It will give HP broader visibility into events across IT operations, security and compliance; the ability to detect threats and risks by correlating both activity and state changes in real-time; and a constant feedback loop between build, manage and monitor to ensure that enterprises remain secure.

ArcSight CEO Tom Reilly said HP would be able to create "a new type of security solution."

ArcSight is supposed to control the internal and external risks associated with cybertheft, cyberfraud, cyberwarfare and cyberespionage.

Last month Intel said it was buying McAfee for $7.7 billion. HP also bought Fortify Software, another security house, last month on undisclosed terms.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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