By Calvin Biesecker
HP [HPQ] yesterday said it has 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. At the close of trading yesterday, 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.
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 (Defense Daily, Aug. 20).
HP also recently acquired software security assurance firm Fortify Software and in July Boeing [BA] acquired network traffic intelligence firm Narus (Defense Daily, July 8).
The information technology enterprise is growing more complex and is faced with escalating risks, Bill Veghte, HP’s executive vice president for Software and Solutions, said on an investor call yesterday.
“Today’s attacks and security threats are more sophisticated, complex and sustained,” he said.
On top of growing enterprise complexity and security threats is a more demanding regulatory environment, Veghte said, 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 said.
“An approach where security is designed in up front to the application and service that the enterprise is developing,” he said.
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.
“Because of this complexity, escalating risk and escalating regulation, HP does not believe that the current practice of layering multiple prevention products after the fact will work,” Veghte said. “We believe organizations need a new approach, an approach where security and IT operations are converged, not siloed.”
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 business with the federal government has been growing, with the federal sector accounting for 32 percent of sales in the latest fiscal year versus 20 percent two years ago. The company also does business with the Department of Homeland Security’s National Cyber Security Division. ArcSight also derives 29 percent of sales from Fortune 100 firms.
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.