HP pays $1.5bn for software specialist

US TECHNOLOGY giant Hewlett-Packard yesterday announced a deal to buy software firm ArcSight for $1.5 billion (£970 million) in a bid by the world's top PC maker to cash in on growing demand for security technology.

The transaction marks HP's second big acquisition since the departure of chief executive Mark Hurd - now appointed co-president of Oracle - following a sexual harassment probe in August.

The ArcSight deal follows HP's winning of a bidding war against Dell for data storage company 3Par.

HP said it will pay $43.50 per share in cash for ArcSight, representing a 24 per cent premium to its closing price last Friday. ArcSight shares rose 25 per cent in early trading with some analysts saying a rival bid was possible.

Michael Holt, a Morningstar analyst, said ArcSight could be attractive to a number of big tech players including Dell.

California-based ArcSight develops software that protects corporate networks from security threats. It serves customers including utilities, government agencies as well as financial services and telecommunications providers.

The deal is the latest in a rash of consolidation in the security technology sector. Last month, Intel agreed to buy McAfee for $7.7bn and in May, Symantec bought Verisign's payment authentication unit for about $1.3bn.

HP said that buying ArcSight would not materially impact its earnings per share in the 2010-2011 financial year. When questioned by analysts about the high premium being paid for a company outside of its core market, HP executives said there was no change to their acquisition strategy and that the company was comfortable with its balance sheet.

The deal to acquire ArcSight is expected to be completed by the year end. Hurd left HP after he was accused of falsifying expenses and a relationship with a female contractor.