HP [HPQ] this week agreed to acquire enterprise security software provider ArcSight [ARST] for $1.5 billion in cash, boosting its ability to offer organizations built-in security as part of wider information technology solutions.
The transaction is expected to close by the end of the year. HP is offering $43.50 per share, a 24 percent premium to ArcSight’s $35.10 closing price last Friday prior to the announcement of the deal. At the close of trading on Monday, ArcSight’s shares were at $43.91, up $8.81, or 25 percent, indicating that investors believe there may be further acquisition interest in the company.
Stephens, Inc., security analyst Tim Quillin says in a note to clients that he believes the deal price to be “very fair” although another offer could emerge.
The pending acquisition is yet another in the hot cybersecurity market, where companies are boosting their security products portfolio both to take advantage of a growth area and to create more integrated and comprehensive security solutions. Intel [INTC] last month reached a deal to purchase the network security firm McAfee, Inc. [MFE], possibly beating out HP on the deal.
HP also recently acquired software security assurance firm Fortify Software and in July Boeing [BA] acquired network traffic intelligence firm Narus.
The information technology enterprise is growing more complex and is faced with escalating risks, says Bill Veghte, HP’s executive vice president for Software and Solutions.
“Today’s attacks and security threats are more sophisticated, complex and sustained,” he says.
On top of the growing enterprise complexity and security threats is a more demanding regulatory environment, Veghte says, pointing to over 80 legislative bills being considered worldwide, including 25 in the U.S. Congress, which is adding to corporate costs.
This all adds up to the need for more integrated offerings that merge information technology operations with security, Veghte says.
“An approach where security is designed in up front to the application and service that the enterprise is developing,” he says.
Combined with ArcSight, Veghte said that HP will be able to offer its enterprise customers solutions that have been vetted for security vulnerabilities, improved situational awareness of threats, an understanding of the risks and impacts to business operations stemming from a threat, and the ability for technology to automatically take action in response to a threat.
ArcSight will become part of HP’s Software division, which had $3.5 billion in sales in its latest fiscal year. ArcSight had net income of $28.4 million, 78 cents earnings per share, on sales of $181.4 million in its recent fiscal year. ArcSight has over 500 employees.
ArcSight’s product and solutions portfolio is aimed at giving customers visibility into threats and risks throughout an organization’s IT network infrastructure, allowing the identification and analysis of events in real-time and responding quickly.