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Goodbye Loudcloud, Hello Opsware

A month after selling its managed services business to EDS, the company formerly known as Loucloud is continuing to restructure itself and is seeing modest success.

Opsware, formerly Loudcloud, now provides IT automation software for server and application management and is hoping to see better results than its previous incarnation. As Loudcloud, the company's Web hosting and managed services model never caught on.

"It was hard to get the market penetration we thought we needed," said Ben Horowitz, president and CEO of Opsware. "The economy has been a problem and it's hit the IT industry especially hard."

EDS bought the managed services division of Loudcloud's business for $63.5 million last month, essentially ending the New Economy company started four years ago by Netscape Communications co-founder Marc Andreessen. From the ashes, however, Opsware was born. The company now sells an IT automation solution that Loudcloud used to use internally to manage customers systems. "We think this is a great restructuring for us," Horowitz said.

There are early signs that Horowitz is correct. Along with the managed services business sale, Opsware made another deal with EDS--a licensing agreement for Opsware's automation software with EDS for a minimum of $52 million over three years. Opsware will manage more than 50,000 servers throughout EDS' 15 major data centers.

Opsware also scored a deal for an undisclosed amount with the U.S. Department of Energy, which will use Opsware System 3 to manage the government agency's servers and standardize configuration and modification for the servers, as well. "The government is our biggest market right now," Horowitz said. "Government agencies are losing a lot of IT personnel and knowledge, and they need to be able to automate and manage their systems. That's where Opsware comes in."

In addition, Opsware reported a 24 percent increase in revenue from one year ago in the second quarter ended July 31, 2002. Total revenue for the quarter was $17.5 million. The company is branching out as well. Last week, Opsware introduced its Multimaster Service Automation Module (SAM), an extension to the Opsware System 3 automation software that serves as a disaster recovery tool and synchronizes the Opsware automation platform across multiple data centers.

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