HP Goes For Thin Client Leadership With Neoware

Hewlett-Packard on Monday said it signed a definitive agreement to acquire thin client manufacturer Neoware for $214 million in a bid to expand its thin client business and its PC strategy.

The acquisition gives HP Neoware's Linux-based thin client technology to go with its own Windows XP-based and Windows CE-based thin client technology, said Kevin Frost, vice president of business desktops under HP's Personal Systems group.

While the combined HP/Neoware product line will still not equal the market share of industry-leader Wyse Technology, San Jose, Calif., it does result in leading positions in the Windows and Linux thin client market, Frost said.

HP also gets Neoware's long track record for customization, including the ability to offer customized images for customers, as well as software for managing large-scale thin client infrastructures, Frost said.

The combined portfolio will offer a significant opportunity to the two companies' customers, said Klaus Besier, president and CEO of Neoware.

"Our major clients match well with those of HP," Besier said. "Many of our clients are global in nature, and we will be better able to serve our clients in the HP environment."

The acquisition is a good move for both companies, said Frank Basanta, director of technology at Systems Solutions, a New York-based solution provider who works with Neoware and HP.

Neoware should have a big positive impact on HP's thin client business, Basanta said. "Neoware is one of the top players in the industry," he said. "Like they say, if you can't design it, buy it.'

Neoware has a big following because its products are easy to configure, Basanta said. "Customers can easily configure its thin clients and get them up and running," he said. "There's never been a time where the customer says after the installation, oh, I don't like this, or I don't like that."

Neoware will be a big help in HP's virtualization strategy, Basanta said. "Everybody is looking at virtualization," he said. "If you use VMware with a server, it's easy to use Neoware to virtualize the desktop."

Both HP and Neoware have direct and indirect channel relationships, and so solution providers of the two vendors can expect little or no change in their relationships, Frost said. "If someone is a Neoware VAR, we expect them to continue with an HP relationship," he said.

Analyst firm Robert W. Baird said in a written opinion that Neoware will prove to be a complementary acquisition for HP, and will ultimately help grow HP's thin client business. However, wrote Daniel Renouard, an analyst at Baird, HP could face go-to-market challenges because of a possible cannibalization of its PC business due to thin client sales.

"Although we believe it is too early to tell, we believe the technology will prove complementary to HP's current PC offerings in the long run, and the acquisition positions HP well to compete in a potential rapid growth market, should demand for thin-provisioning accelerate," Renouard wrote.

Frost said HP is a leader in both the PC and the thin client markets. "We've managed to balance this for years," he said. "There's going to be a lot of desktops sold for many years. In developed markets like Germany and the U.S., we might see a slide to thin client computing. But in developing countries, the PC business is growing."