and I always thought that "HP was after IBM" :-)

somehow this article fits too.

http://www.forbes.com/2002/07/30/0730hp.html?partner=yahoo&referrer=

Corporate Computing
Hewlett-Packard Tries Software, Again    Lisa DiCarlo, 07.30.02, 8:00 AM ET

NEW YORK - If Hewlett-Packard truly wants to compete with the big boys of
corporate computing, it must succeed at something at which it has
consistently failed--that is, to build an enterprise-software business that
leverages all of the company's strengths.

The first piece of a new corporate software strategy was revealed on July
15, when HP (nyse: HPQ - news - people ) said it would discontinue
"middleware" products gleaned from its half-billion-dollar purchase of
Bluestone Software in January 2001. In its place, HP will partner with BEA
Systems (nasdaq: BEAS - news - people ), a leader in this space, to develop
and market each other's products.

Sound familiar? It should. In 1999, BEA and HP struck a similar deal, where
HP agreed to invest $100 million in BEA over three years in exchange for
development and support of HP products. But the deal never met its goals,
partly because most of BEA's software runs on Solaris systems by Sun
Microsystems (nasdaq: SUNW - news - people ), rather than HP-UX, HP's
version of Unix. HP ultimately reduced the size of its investment and,
within 18 months, HP bought Bluestone, a BEA competitor. Now that has
crumbled, too.

Like many of HP's software efforts over the years, the Bluestone purchase
was promoted as a turning point. At the time, Bill Russell, now HP's vice
president of global alliances, said the purchase represented "a dynamic new
direction" for the company, one that would "change the future" for its
customers. It was oversold and underexecuted.

E-speak software also fell short. In 1999, HP positioned the software as the
centerpiece of its Internet strategy, claiming it would be "the universal
language of e-services on the Net." It tried to build a network of
developers, and had tentative deals with companies such as Qwest
Communications International (nyse: Q - news - people ) and Oracle (nasdaq:
ORCL - news - people ) to write applications supporting e-speak. But it
never really materialized, and today Web services are more associated with
Microsoft's (nasdaq: MSFT - news - people ) .Net and Sun's Java.

It's impossible to overstate the importance of software to HP's success.
With its hugely profitable printer franchise under fire--Dell Computer
(nasdaq: DELL - news - people ) is planning to sell its own line--HP needs
another cash cow to subsidize its moneylosing divisions. Consider that IBM's
(nyse: IBM - news - people ) software division accounted for less than
one-fourth of its sales in the first six months of 2002 but, with 83% gross
margin, software represents more than two-thirds of its profits.

But even more important than immediate profits, from a strategic standpoint
HP needs a much broader enterprise-software portfolio to be considered a
full-service technology provider. Even Sun, a much smaller company, has a
fuller portfolio of enterprise software and, at least right now, a more
compelling end-to-end lineup.

"You can't be a systems vendor in today's world and not have a strong
software component to your strategy," says analyst Dwight Davis of Summit
Strategies.

But how can Hewlett-Packard find the success that has so eluded it? One of
the levers HP will try to use to its advantage is its size, which has of
course doubled since buying Compaq Computer. That makes the company a more
attractive partner for best-of-breed firms looking for a large distribution
channel. It also gives it the broader reach to compete with IBM.

"It's the common-enemy theory," says analyst Nina Lytton of Crossroads/OSA.

(Indeed, EMC (nyse: EMC - news - people ) recently reunited with HP for
co-development of storage technologies, more than a year after a previously
unsuccessful relationship between the two fell apart. EMC is fiercely
competitive with IBM.)

The two companies HP will focus on initially will be Microsoft, with its
.Net initiative, and BEA, which makes software that helps disparate
applications and Web sites communicate with each other.

"HP now represents a large portion of the target base for Microsoft and
BEA," says Mike Gilpin, analyst at Giga Information Group. "It's beneficial
[for them] to have a big channel like HP."

Despite past failures, HP does have a large and loyal installed base of
software customers. This is the other point of leverage. The latest strategy
will rely on products called OpenView and OpenCall, which, at a high level,
will manage the Web services developed by partners underneath. This
network-management software will work with Web services and applications
based on Java or .Net.

Gilpin says HP's current enterprise-software strategy is retrenchment into
territory where it has more credibility. He says that many of the
technological elements are already there, but that HP will offer additional
services on top of the existing technology.

HP declined to discuss anything regarding its software strategy but in a
statement earlier this month said that focusing on OpenView and OpenCall as
the centerpiece of its software strategy "enables us to differentiate and
add value in the areas where we have assets, experience, and leadership."

It's a unique and challenging approach for HP. "The question is how software
is going to contribute to the profitability of the company," says Lytton.
She says that in order to be successful, HP needs to coordinate all its
product groups and leverage the assets of the whole company, including
hardware and services, the way IBM has.

HP does not break out software revenue, which is reported as part of the
computer systems division, HP's third-largest product group. Divisional
sales for the first six months of this fiscal year were $3.88 billion with
losses of $400 million. HP will report third-quarter results, its first
after merging with Compaq, on August 27.

Will HP finally build a broad-based software business that meaningfully
contributes to the success of the rest of the company? Gilpin puts the
chances at "better than 50%" that the latest strategy will do the trick. It
could be disastrous if it doesn't. In the meantime, Gilpin says that HP's
sheer bulk puts it in a different league. "It's not going to be as easy [for
competitors] to kick around HP anymore."

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