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Issue Date: April 2008

AnalystWatch: HP to acquire Tower Software

April 2008
Sue Clarke, Butler Group

On 31 March, HP announced that it had signed a pre-bid agreement with Tower Software to acquire the Australia-based enterprise content management vendor.
Tower Software's strength lies in its document and records management (DRM) capabilities, although with the addition of web content management (WCM) it has moved further into the ECM space, despite lacking some functions that the larger ECM vendors have added to their portfolios.

The acquisition, which is expected to close in the second quarter of 2008, will be conducted via an off-market bid for all the outstanding shares of Tower Software. The board of directors of Tower Software have unanimously approved the transaction and the three largest shareholders have stated that they intend to accept the offer in the absence of a higher third-party offer. Between them, these three shareholders own more than 90% of the shares.
Tower Software's TRIM Context already forms part of HP's Integrated Archive Platform, formerly branded as RISS. The acquisition of an ECM vendor will remedy a serious shortfall in HP's portfolio.
In competitive terms, the past few years have seen EMC transform itself from a storage hardware vendor into a hardware, software, and services vendor that provides a vertical information management stack from storage, through security, to an ECM platform, and solutions that sit on top of the stack.
IBM, HP's biggest competitor, also has the products required to build an information management stack. Oracle is another vendor that has moved in this direction through its acquisition of Stellent, which left HP as one of the only major product area vendors without an ECM capability, which put the company at a disadvantage.
Because of the close integration with Tower Software this was the obvious vendor for HP to acquire, and it will result in the company becoming much more competitive in the information management market. It will also help HP to increase its share of the archiving market as both EMC and IBM have their own archiving platforms.
The acquisition will also benefit Tower Software as its capabilities will be extended through the addition of HP's discovery and compliance capabilities in information collection and retention.
The financial strength of HP should allow it to acquire additional functionality when required to ensure that TRIM remains competitive with the larger ECM platforms. However, in the short term Tower/HP needs to build solutions on top of the TRIM platform in order to remain competitive against other ECM vendors that have already invested heavily in both vertical and generic solutions.
This is an excellent move for HP and one that is long overdue. In order to compete effectively with IBM, and strengthen its information management portfolio, HP needed to move into the ECM market.
In the increasingly competitive archiving market, by the time HP entered the market with its RISS product (now IAP), EMC had already established a huge market lead, and with NetApp, IBM, and other vendors also moving into this space, it is rapidly becoming crowded.
The ability to provide an end-to-end information management solution is a huge advantage to any vendor and the fact that the products are already integrated means that HP should be able to hit the ground running with its information management stack.
It is worth noting however that the boundaries of information management are continuing to expand, and HP will require further acquisitions if it is to be a genuine powerhouse in this broader space.

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