June 6, 2002 5:35 PM PDT

HP to stop making e-business software

Hewlett-Packard plans to stop making e-business software after the products failed to catch on in the lucrative field, an HP executive said earlier this week.

In a presentation to analysts Tuesday, Peter Blackmore, executive vice president of HP's enterprise systems group, said the company has suffered heavy losses with its own e-business software and will now partner with other software companies to offer HP customers the programs they need to take their business to the Web.

"Many of the assets we have there we will retire, and we're going to move to a partnered strategy, because that is what the customer wants," Blackmore said. "We move to a partnership model and then make that part of the business, avoid the losses we have and make the overall software business profitable."

While not being specific in his speech to analysts, Blackmore said the company is looking to retire its "middleware" software. HP's core product in that area is its application-server software, technology that runs e-business and other Web site transactions.

On Thursday, however, an HP representative was more guarded about the computing giant's software plans. The representative said Blackmore's comments were "premature" and that HP executives are still weighing all options, which include the possibility of leaving the e-business software market. The company will formally announce its software strategy at the end of June, the representative said.

HP in the past two years has made a big push into the e-business software market to better compete against its two principal rivals, IBM and Sun Microsystems, high-end computer makers that have more extensive software portfolios.

But with HP busy with its merger with Compaq Computer, the company is now focusing on quickly turning around the unprofitable parts of its business. The overall software business, which makes up more than $1 billion in yearly sales, had been dragged down by losses in middleware software products. Similarly, HP has made a priority of turning around its money-losing personal computer unit.

HP acquired application server technology in October 2000, when it bought Bluestone Software, a small company that competed against IBM, Sun Microsystems, Oracle and others in the market for application-server software.

Last February, HP CEO Carly Fiorina said boosting software revenue growth was a high priority. But by last November, HP announced it was giving away its own core application server for free, while charging customers for advanced features and add-on technology. HP owns only 4 percent of the application-server market, far behind market share leaders BEA Systems and IBM.

"They gave it away for free for a while, but they still had no market penetration," said Gartner analyst Mark Driver. "HP acquired good technology, but it was a cultural mismatch: a hardware company trying to drive out software infrastructure."

News.com's Ian Fried contributed to this report.

 

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