Virtualization gets nod from HP, VCs

By Ann Steffora Mutschler, Senior Editor -- Electronic News, 7/23/2007

Virtualization technology is being used in a variety of forms today: In the IT space, virtualization promises reduced maintenance costs, minimal application updates and a higher level of security; in the semiconductor development area, virtualization is used to speed design cycles.

In the first case, to expand in growth markets and further its leadership in personal computing. Palo Alto, Calif.-based computing giant Hewlett Packard reported today it has signed a definitive merger agreement to purchase King of Prussia, Pa.-based thin client computing and virtualization technology supplier Neoware Inc. for $16.25 per share, or an enterprise value of approximately $214 million on a fully diluted basis. 

Intel Corp. also has its eye on the virtualization market and has taken a stake in VMware, as well as investing in VirtualLogic.

This acquisition activity makes sense considering market researchers at IDC are expecting virtualization and multicore technology to be highly disruptive to the server market.

HP said it expects the acquisition of Neoware to accelerate the growth of its thin client business by boosting its Linux software, client virtualization and customization capabilities, expanding its regional sales footprint and broadening its hardware portfolio.

Kevin Frost, VP of the business desktops, personal systems group at HP said thin clients are an important component in today’s overall computing strategy.

Thin clients promise reduced maintenance costs, minimal application updates and a higher level of security compared to other desk-based computing products with the solid-state devices connecting over a network to a server where all processing and storage takes place, the company added.

With this transaction, Neoware’s Linux-based thin client solutions and software will be combined with HP’s thin clients based on Microsoft Windows XPe and Windows CE and its virtualized client solutions, such as blade PCs, blade workstations, virtual desktop infrastructure and server-based computing.

Following completion of acquisition, which HP expects will close in Q4, Neoware will be integrated into the business desktop unit of HP’s personal systems group.

In a separate usage of virtualization technology, promoted by companies such as VaST Systems, which today closed an investment round of $12 million, virtualization allows users to shave time from development, and allowing them to get to market faster.

Sunnyvale, Calif.-based VaST president and CEO Alain Labat explained that customers use its electronics virtualization technology to cut six to twelve months off their development cycles. “Virtualization also uniquely solves the growing problem of enabling earlier software development,” he said in a statement.

VaST’s tools allow the creation of a virtual system prototype — that the company describes as a highly accurate software model of a system that operates at near real-time speeds under actual software loads.

In regard to its funding, VaST said it will be used to drive product and market expansion. The round was led by ZenShin Capital with participation from previous investors Allen Buckeridge, Foundation Capital, and Mohr Davidow Ventures to drive growth in key automotive, consumer and wireless markets.

In other HP news, the company also said today it is acquiring data center automation software provider Opsware Inc. for $1.6 billion.