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Partners Not Shaken By HP's ArcSight Acquisition

Channel partners say that HP's acquisition of security and event management company ArcSight will give the company a much needed boost in the branding and marketing arena, as well as bolster its services and support around its existing platforms.

HP's acquisition of security and compliance management company ArcSight has security channel partners hopeful about increased financial backing and extended reach but they say the deal wasn't a surprise and won't likely have a significant impact on their business for a while.

HP said Monday that it entered into a definitive agreement to buy ArcSight for $1.5 billion, or around $43.50 a share -- a figure 8.3 times the company's revenue of $181 million in its last fiscal year. Executives at both companies contend that the marriage was designed to build specific security technologies -- such as network access, access control, change and configuration management -- into their applications, while giving the company the ability to evaluate threats in deeper context.

"Rather than waiting, we want to be able to test those before they go into the preproduction environment," said Jonathan Martin, HP vice president and general manager of information management and commercial solutions. "With that rich set of information we're able to evaluate those new threats with better context and find threats and find vulnerabilities more quickly, even by making changes into the development cycle."

Martin declined to specify whether HP would fold ArcSight's product line into its own or keep the company as a standalone entity, but hinted that it had designs to integrate the security technologies directly into its applications.

"Remediating action is the key to this new approach to security," Martin said, as opposed to "building security into the chip," he added.

While some recent security purchases, including Intel's acquisition of McAfee, have left many partners scratching their heads, this time solution providers say that the HP-ArcSight deal was one of the least surprising to date. ArcSight had announced earlier this month that it was putting itself up for bid, and contenders came down to a handful of enterprise organizations,which reportedly included IBM, SAP and Oracle.

"I don't think anyone is surprised by the acquisition. There were only a handful of companies. HP seemed to be the likely one," said Dave Gilden, vice president of public sector for Kansas City, Mo.-based FishNet Security, adding that the acquisition was indicative of an ongoing and accelerating trend of consolidation in the security space. "It's something that we're constantly monitoring. Hopefully (the ArcSight acquisition) is not disruptive to our customers and existing partnerships."

"I think it's a good thing for ArcSight," said Dan Thormodsgaard, director of solutions architecture at Fishnet. "Where were they going to go? How do they expand their product portfolio? They were bound to get consumed."

Thormodsgaard said that he anticipated that HP would probably retain ArcSight as a standalone entity for at least a year, similar to their strategy with 3Com's TippingPoint, which they acquired last year. The immediate result would likely mean "business as usual" for a while, he said.

"They don’t seem to really touch (acquisitions) for about a year, much like we saw with TippingPoint," he said. "It will be interesting to see how it will play out with the recognition of (ArcSight's) VARs, how they embrace that."

Gilden said that it's still unclear how the acquisition will impact Fishnet going forward, but said he planned to closely watch how HP will transform or evolve ArcSight's services space.

"That's something we'll be keeping our eye on -- to see if they're going to integrate (ArcSight) into their existing channel model or keep them as a standalone program," he said, contending that he'd prefer if the company was kept as a standalone entity, while acknowledging that "that's unlikely."

Next: HP Executives, ArcSight Partners Weigh In On Deal


Other ArcSight partners were more optimistic, maintaining that the acquisition would give the security company the necessary global reach and visibility that it previously lacked.

"What this partnership is going to allow ArcSight to do is expand its reach not just as a key player, but to start to deliver those services required around the ArcSight Platform," said David Sockol, president of Santa Clara, Calif.-based Emagined Security. "It will also help ArcSight achieve better market penetration now that they have the full backing of HP."

The expanded reach would give channel partners much needed visibility, Sockol said, especially in light of the fact that ArcSight has struggled with branding and marketing in the past. In addition, HP could also give ArcSight the added boost with services, and provide them the necessary support to address complex configurations that served as a deterrent for customers in the past.

"(ArcSight has) had a lot of branding issues in the past. They've been perceived to be too expensive to build and operate. With HP in the background, they might be able to have a stronger support staff and a renewed focus. Too many people look at ArcSight and see it as a huge time commitment," he said "Having the HP salesforce behind them as well, we're hoping they can take a better approach."

ArcSight executives agreed that the "sheer number of customers" from the HP deal would significantly extend its reach and satisfy partner requests to get better visibility.

"How do you get faster scale and faster leverage up? This is a great way to do it," said Rick Caccia, ArcSight vice president products and channel marketing.

HP executives say that the acquisition of a security event management and compliance vendor helps round out the company's portfolio as part its broader security strategy, and provide another building block for the company to become a "security leader."

"It's an aggressive step forward to help with this new approach to security," said Bill Veghte, HP executive vice president on a conference call Monday.

Last September, the Palo Alto,Calif-based hardware and computing giant ramped up its security offerings with the acquisition of 3Com/TippingPoint. Last month, HP acquired Fortify, a San Mateo, Calif.-based software security assurance company.

Veghte added that HP's plans to bulk up its security wares will help customers protect themselves against the evolving threat and compliance landscape, which has become more sophisticated, complex and sustained. "The days of smash and grab attacks are over," he said.

HP's Martin was vague as to whether the company planned to make any more security purchases going forward but said that the executive team would make that decision down the road with the closing of both the Fortify and ArcSight deals, which would likely be by the end of the calendar year.

HP executives also declined to comment on the challenges to new acquisition with the absence of a CEO after Mark Hurd resigned last month after an investigation into what the company called improperly filed expenses and an improper relationship with a subcontractor.

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