HP spends big to expand e-commerce software

Hewlett-Packard buys Bluestone Software for an estimated $470 million, as the computing giant continues to make inroads into the exploding e-business software market.

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Stephen Shankland
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Hewlett-Packard bought Bluestone Software for an estimated $470 million Tuesday, as the computing giant continues to make inroads into the exploding e-business software market.

In the all-stock deal, Bluestone shareholders will receive 0.24 shares of HP common stock for every Bluestone share they own. Bluestone's stock closed at $23.19 Tuesday.

Analysts say

Meta Group says Hewlett-Packard's purchase of Bluestone could be the start of an acquisition binge during which the company will try to accumulate and integrate a complete software offering.

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Bluestone gives HP a much-needed boost as it attempts to provide the software that allows companies to take their businesses to the Web. The acquisition narrows the gap between the software efforts of HP and two of its principal rivals, Sun Microsystems and IBM, high-end computer makers that have more extensive software portfolios.

Bluestone, which as a small, independent company competed against giants Microsoft, IBM, Oracle and others, makes e-business software that allows companies to create e-commerce sites. Bluestone sold application servers, software that runs e-commerce transactions.

While HP doesn't have a strong software history, it's a market the computing giant needed to dive further into, analysts say.

"It really isn't possible to execute just a hardware-only strategy any longer, so this is a gamble HP had to take," said analyst Mike Gilpin, of Giga Information Group. "Businesses don't want to buy hardware from one company, an operating system from another company, and software from another and have to wire it all themselves. They want their solutions to come from one big provider--and that's the type of company HP is trying to make themselves into."

Before, HP's software efforts included a collection of software technologies for jobs such as security and systems management, as well as a collection of projects such as E-speak for what HP sees as the future of e-commerce.

Sun, in contrast, has an increasingly large influence over the iPlanet suite of e-commerce software products that was spawned when America Online acquired Netscape Communications. Sun has joined many of its own software products with the Netscape ones, and now about 1,700 of the 2,500 iPlanet personnel are from Sun, Sun executives said last week.

To advance their software visions, both HP and Sun struck partnerships with software companies this week. HP on Monday announced plans to create a software partnership with VerticalNet, a company that sets up online marketplaces for specific industries. Sun on Tuesday announced a partnership with VerticalNet competitor CommerceOne, under which CommerceOne will tune its e-commerce software for Sun's computers.

Analysts say the Bluestone acquisition also furthers HP's E-speak vision to deliver services over the Web. HP and other companies, such as Microsoft, Sun, IBM and Oracle, share the same "Web services" vision, in which people in the future won't have to install software on their PCs or handheld devices. Instead, software will be accessed through the Web as a service.

"If you're going to promote an infrastructure like E-speak, you needed an environment where customers could implement those services," said Giga analyst Gilpin.

Today's acquisition gives Bluestone a larger sales and marketing team to sell its products. Its acquisition continues the consolidation occurring in the application server market, where more than 50 companies once competed.

Online banking software firm Brokat acquired Gemstone Software in June. Previously, BEA Systems acquired WebLogic, and Sun Microsoystems acquired two application server companies: NetDynamics and Forte Software.