HP Partners See Upside In Robust Security Growth

Although Hewlett-Packard has discontinued its recently released tablet TouchPad and announced a possible spinoff of its Personal Systems Group, revenue from HP’s software business -- including two security organizations -- is experiencing double-digit growth.

And that strong performance has security partners optimistic about their relationship with the Palo Alto-based IT giant, even as it redefines itself with product shifts.

On HP's Q3 earnings call Thursday, CEO Leo Apotheker said the company's Software division, incorporating ArcSight and Fortify, two security firms the company acquired last year, experienced 20 percent overall growth, with revenue totaling $780 million. The division’s results incorporated 29 percent licensing growth, 30 percent services and revenue growth and 12 percent support revenue growth, HP reported. In particular, Apotheker called out both ArcSight and Fortify, which he also said experienced ’double-digit growth.’

As such, Peter Bybee, president and CEO of San Diego, Calif.-based Network Vigilance, a security solution provider, said his partnership with HP remains strong, as he continues to benefit from rising profits based on growing sales of HP’s security offerings.

’Security is still a best of breed world. HP has done some significant acquisitions in security, and those are all great best of breed products,’ Bybee said, adding that security margins were also significantly enhanced with backend consulting and managed serviced opportunities supported by HP, which has ’exponential effect on the partners.’

’We’re also seeing tremendous growth there,’ he said.

Part of the reason for that success, he said, is that HP managed to maintain the integrity of the products, while retaining much of the acquired security company’s previous channel staff throughout the acquisition process.

’It’s been helpful to have those pre-existing relationships,’ Bybee said. ’We know where to get things done where normally we might have given up or just not known who to call. The majority of the people they brought on have stayed through the transition. That has helped ease the pain for channel partners. The channel relationship has been very important to us.’

HP acquired security and compliance management firm ArcSight in September of last year for $1.5 billion -- a figure 8.3 times the company's revenue of $181 million in its previous fiscal year.

Also in September 2010, HP completed its acquisition of application security company Fortify Software, based in San Mateo, Calif., which it agreed to purchase in order to add offerings aimed at reducing business risk, meeting compliance regulations and protecting against malicious application attacks.

Additionally, HP’s stated plans to possibly divest itself of its PC business could potentially give the company renewed focus that could breathe new life into its software and other offerings, partners said.

Bybee compared HPs strategy to Qualcomm’s decision to spin off their handset division. ’There was always a part of their business that seemed to drag them down in the low margin side,’ he said.

Next: HP's Potential PSG Spin Off Could Renew Focus On Software, Partners Say

Meanwhile, during the Q3 earnings call Thursday, Apotheker said that the HP board gave the company green light to ’explore strategic alternatives’ for its PSG group, which could include a ’a range of options that may include, among others, a separation of PSG from HP through a spinoff’ or sale, he said, adding that the process would likely take at least 12 to 18 months to complete.

’For our PC business to remain the world’s largest personal computing business, it needs the flexibility and agility to make decisions best for its future directions,’ he said.

David Sockol, president of Santa Clara, Calif.-based Emagined Security, and an ArcSight partner said he was not daunted by HP’s WebOS struggles or its declining PC sales, but the increasingly stringent distribution and pricing terms and conditions from ArcSight’s sole distributor WestCon.

Among other things, the customer is prohibited from contesting the validity of an order, can only return a product if its unused and in original packaging and can only refund an order with credit memos, according to WestCon’s stated terms and conditions.

’However, Sockol maintained that he hoped to reinvigorate his ArcSight partnership if HP were to put more of a channel friendly emphasis on its software security solutions as it slowly migrated away from its hardware business.

’As HP realizes the hardware business is becoming increasingly challenging, my hope is that they will start to recognize the benefits from the software industry and make pricing become more in line with what is required to be able to win business,’ he said. ’I am really hopeful that as they will see better opportunity, that it will show up in their software areas, which we can then grow business on.’