NEW YORK, Oct 1 (Reuters) - Hewlett-Packard's (NYSE:HPQ) choice of CEO may spur a flurry of deals in the software industry, as it shores up one of the weakest parts of its business to do battle with Oracle (NASDAQ:ORCL) and IBM (NYSE:IBM).
Leo Apotheker, former head of German business software giant SAP (DE:SAPG) and now newly installed chief executive at the world's largest technology company, stressed that software was the "glue" tying its business together.
Some analysts foresee HP thus striding out on an acquisition path. Software yields only 3 percent of HP's revenue, compared with over 20 percent at IBM, and Gleacher & Co analyst Brian Marshall called it HP's "Achilles heel".
Now, the growing popularity of cloud computing -- which enables users to access software over the Internet -- means businesses will almost surely buy fewer servers and other computers in future -- a threat to hardware-centric HP.
"Considering that servers, desktops, and notebooks represented roughly 40 percent of HP's total revenue in 2009, it is fair to assume the company will have some issues on its hands in the not too distant future," Marshall said.
But the pool of available targets is shrinking, as cash-rich technology players chase low valuations. In past months, HP bought security software specialist ArcSight for $1.5 billion, Intel Corp shelled out $7.7 billion for McAfee Inc (NYSE:MFE), IBM picked up Netezza Corp for $1.7 billion, and Symantec Corp (NASDAQ:SYMC) bought Verisign Inc's (NASDAQ:VRSN) payment authentication unit for about $1.3 billion.
And with IBM, Oracle, and other technology vendors already having bought up software assets in past years to expand beyond commoditized hardware, HP may not have much of a selection.
"Ten years ago it would have been a kid in the candy store. But that's no longer the case," said Collins Stewart analyst Louis Miscioscia.
DON'T COME CHEAP
Atlantic Equities analyst Philip Alling saw some potential targets, including business software maker Tibco Software (NASDAQ:TIBX), data integraton software company Informatica Corp (NASDAQ:INFA), and Citrix Systems Inc (NASDAQ:CTXS).
But such jewels aren't likely to come cheap, and might be fiercely fought over.
IBM said this year it plans to spend around $20 billion in acquisitions through 2015. Software already accounts for over a fifth of its business, but it plans to expand more into software and services, including business analytics, in coming years.
Hewlett-Packard 
