July 15, 2002 10:55 AM PDT

HP exits e-business software market

Hewlett-Packard on Monday discontinued its family of e-business software after failing to make a splash in the multibillion-dollar market.

After a two-year effort, HP decided to discontinue the core pieces of its NetAction product line, which included application-server software designed for Web transactions, and related software for building Web services, technology that allows companies to interact and conduct business via the Internet.

HP executives had hinted that the company would exit the e-business software market after suffering heavy losses. The company now plans to partner with Microsoft and BEA Systems to provide these applications.

HP will refocus its software strategy on three technologies that manage software: HP OpenView, used to manage and monitor the health of businesses' computer systems; HP Utility Data Center, used to simplify management of sprawling data centers; and HP OpenCall, used by telecommunications service providers to offer telephony and Internet services to customers.

"The OpenView franchise is a license to print money. NetAction was a license to burn it. (HP CEO) Carly (Fiorina) made a tough decision, and probably the right one," said Illuminata analyst James Governor.

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

Building up, breaking down
HP spent $470 million in October 2000 to acquire Bluestone Software, a small company that competed against IBM, Sun and Oracle, to build up its application server software arsenal. Fiorina as recently as last year said boosting software revenue growth was a high priority for the company.

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 and IBM, according to Giga Information Group.

"HP did a lot of great research and development, but it failed to transfer the technology from the lab to the field," Governor said. "Bluestone was a last throw of the dice to drive a (software) 'middleware' and integration story."

Nora Denzel, senior vice president of HP's software global business unit, declined comment on whether the company will try to sell its NetAction e-business products to another software company. HP will announce on Sept. 15 a detailed program that will help its customers migrate away from NetAction products. HP will sell BEA's e-business software to companies that support the Java programming language, while selling .Net products to its customers that prefer Microsoft technology.

"The best thing to do for our customers is to partner with the industry leaders in an agnostic way toward Java 2 Enterprise Edition and .Net and work with those market leaders, so we can give (customers) a choice," Denzel said.

 

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