Hewlett Packard Co. to acquire BlueStone Software Inc. for 30.01 times revenue

Weekly Corporate Growth Report, Oct 30, 2000

The Deal: Hewlett Packard Co. has agreed to purchase BlueStone Software Inc. for $468.1 million in stock. The acquisition is an effort to expand Hewlett's portfolio of software used to help conduct transactions on the Internet. Hewlett will issue 0.2433 presplit common share for each outstanding share of BlueStone. After the news of the transaction was announced, shares of Hewlett slipped $5.88 to $92.50, while BlueStone shares rose $1.25 to close at $23.19.

Discussion: BlueStone Software Inc. makes Java-enabled server software that lets companies deploy information internally and conduct business over the Internet. Its flagship Sapphire/Web suite helps users build applications and find, access and deliver information. Its Bluestone extensible markup language (XML) suite converts information into XML documents. The company also makes Total-eBusiness e-commerce software. Consulting, training and support services account for nearly 25 percent of sales. Hewlett Packard Co. is the No. 3 computer company worldwide. The company provides computers, imaging and printing peripherals, software and computer-related services. More than half of HP's sales come from outside the United States. HP is restructuring itself as an Internet specialist providing Web hardware, software and support. The company spun off its test and measurement equipment and medical electronics businesses as Agilent Technologies. HP is also in talks to buy the information technology unit of consulting powerhouse PricewaterhouseCoopers.