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Virtualization informs HP's Neoware acquisition

Citrix may reign supreme among current thin-client customers, but interest in VMware and virtual desktop infrastructure (VDI) is moving the market along.

Virtualization and virtual desktop infrastructure (VDI) was the thinly veiled subtext of Monday's announcement by Hewlett-Packard Co. indicating that it planned to acquire thin-client computing vendor Neoware Inc.

"These are exciting times in the thin-client computing market," said Klaus Besier, Neoware president and CEO. "Interest in virtualization and environmentally friendly solutions has made this the right time for these two companies to join their efforts."

HP will pay $16.25 per share for Neoware, or approximately $214 million, and will use the latter's assets to bolster HP's own extensive thin-client computing offerings.

As Kevin Frost, HP vice president of business desktops in the Personal Systems Group, defines them, thin clients are "simpler, lower-cost computers that rely on servers for their computing power and storage." Their benefits over "fat" desktops include better security, easier management and lower cost, he said.

Traditionally deployed by large organizations within government, education, health care and retail, thin clients have been used largely to connect to Microsoft Windows Terminal Services or Citrix Presentation Server implementations, said Michael Rose, associate research analyst at Framingham, Mass.-based research firm IDC. Other use cases include terminal emulation green screen replacement.

Frost said that HP has experienced a "broad shift" across industries toward thin-client computing. Even though HP is the leading provider of PCs worldwide, Frost said that currently many of HP's large-enterprise customers are piloting thin clients.

Part of that interest stems from increased use of virtualization software from vendors like VMware Inc.. By running software such as VMware's ESX on back-end servers, organizations can run multiple "virtual desktops" on a single server, which are projected onto end users' thin clients.

"With the success of VMware, there's a lot of interest from organizations about how they can use it to reduce costs for their businesses," Frost said. While the market is still young, "it's our belief that it will accelerate."

Frost added that the market for Citrix-like thin-client deployments also remains strong, particularly in emerging markets such as India and within sectors like education. IDC estimates growth of the thin-client market at 21% per year, which HP considers "frankly, conservative," Frost said.

Neoware in the thin-client landscape
By acquiring Neoware, HP has whittled down the list of thin-client device manufacturers to a handful of players: itself, Wyse Technology Inc. of San Jose, Calif., and NEC Corp. in Irving, Texas. Although not strictly a thin-client manufacturer, PC blade manufacturer ClearCube Technology Inc. of Austin, Texas, also competes in the space.

Neoware's assets include an extensive line of thin-client devices, including the m100 mobile device and a long list of software, including the following:

  • Image Manager image management software;
  • TeemTalk terminal emulation software;
  • ezRemote Manager, a thin-client management tool;
  • Device Manager, a tool to configure and manage thin clients; and
  • NeoLinux, a Linux-based thin-client operating system.

While Neoware offers thin clients that run Microsoft Windows operating systems such as Windows XP Embedded (XPE), Linux-based thin clients as well as the ability to provide customized Linux systems are widely considered to be the company's forte.

"Roughly speaking, about half the thin-client market is based on XPE, and the other half is on Linux or Linux derivatives," said Frost. "What Neoware has with NeoLinux allows us to address that half of the market in a smarter way."

The acquisition is expected to close in the fourth quarter of this year.

Let us know what you think about the story; email Alex Barrett, News Director.

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