HP Buys Eucalyptus, Cloud Open Source Software Developer

Acquisition shy Hewlett-Packard (HPQ) has plunked down a reported $100 million to buy Eucalyptus, a cloud open source software provider, in a deal that also gains the vendor a highly regarded new head of its cloud business unit.

Terms of the agreement weren’t disclosed by either party but Re/code reported that sources placed the transaction’s value at less than $100 million. It's HP's first noteworthy acquisition since the $11 billion Autonomy disaster in 2011. As of April 2012, the 5-year-old Eucalyptus had raised some $55.5 million in three venture funding rounds from investors New Enterprise Associates, e.ventures, Benchmark and Institutional Venture Partners, capped by a $30 million Series C round, according to CrunchBase.

Eucalyptus Chief Executive Marten Mickos will take over HP’s cloud business as senior vice president and general manager of the Cloud unit, reporting to HP chief executive and chairman Meg Whitman. Mickos’ job, in a nutshell, is to build out HP’s Helion OpenStack-based portfolio to boost the vendor’s overall cloud service business.

“Today we are taking a big step to be part of the world’s best enterprise cloud organization,” wrote Mickos in a blog post. “Eucalyptus Systems has agreed to be acquired by HP and become a part of the Cloud business,” he said.

“The visions and dreams of the Eucalyptus team, my own passion for leading fast-moving innovative teams, the amazing strength of HP’s Cloud team, and the ambitious goals of HP overall are coming together,” he wrote. “This strong combination will provide our customers with the world-class solutions, services and support for private, managed and hybrid clouds.”

Martin Fink, who has been running HP’s Cloud business since Biri Singh left last year, will step away from his cloud post but retain his jobs as HP chief technology officer and HP Labs director while continuing to lead HP’s network functions virtualization (NFV) business.

“The addition of Marten to HP’s world-class Cloud leadership team will strengthen and accelerate the strategy we’ve had in place for more than three years, which is to help businesses build, consume and manage open source hybrid clouds,” said Whitman. “Marten will enhance HP’s outstanding bench of Cloud executives and expand HP Helion capabilities, giving customers more choice and greater control of private and hybrid cloud solutions.”

The deal drew a critical response from Forbes blogger Ben Kepes, who wrote, “It’s hard to not see this deal as a fire sale. Many industry insiders had long assumed that Eucalyptus was running out of money and failing to see massive traction—it was up against a formidable foe in the form of the OpenStack ecosystem and, despite the huge credibility that CEO Mickos brought, there is only so much one person can do against broader industry trends. … Don’t get me wrong—Mickos knows the cloud. Eucalyptus is an interesting project, but within HP it’s hard to see how it won’t wither and die like so many previous cloud initiatives.”

HP may still have some strategic figuring out to do about its cloud business.