Takeover by Hewlett-Packard approved by Neoware shareholders

Neoware Inc., a maker of thin-client computing software and devices, will become a subsidiary of Hewlett-Packard Co. after shareholders overwhelmingly approved a $214 million buyout bid today.

HP said in July that it would buy Neoware, of King of Prussia, for $16.25 a share to boost its thin-client computing business. Neoware will become part of HP's business desktop unit.

About 96 percent of the votes cast, and about 68 percent of the shares entitled to vote, favored the deal, Neoware said. The company declined to disclose the number of votes cast. It had a total of 20.2 million shares outstanding as of Sept. 6, according to Bloomberg News.

A couple of dozen people attended the shareholder meeting at the Valley Forge Suites Hotel in Chesterbrook. Most of the voting was by proxy. Neoware said it expected the deal to close Sunday.

HP, which is based in Palo Alto, Calif., said in July that the purchase would further strengthen its PC business.

Thin-client computers do not have hard drives. They rely on network server computers to store memory and run programs. By running on servers, and not the traditional desktop, thin clients aim to reduce maintenance costs, require minimal application updates, and offer a higher level of security.

The merger will combine the strengths of each company.

HP is interested in Neoware's Linux software capabilities and its footprint in parts of Europe where HP wants to expand, Klaus Besier, Neoware's president and chief executive officer, said after the meeting.

"They have certain technologies; we have certain technologies, but they have a much further reach," Besier said. "So it's a good complement. It just makes a lot of sense for both companies and for our customers."

Besier and certain other Neoware executives will remain in King of Prussia.

Neoware, with 198 employees worldwide, including 80 to 90 in King of Prussia, sells products through alliances with International Business Machines Corp., Lenovo Group Ltd., NEC Corp. and ClearCube Technology Inc., and other indirect channels such as distributors, resellers and systems integrators, and, to a lesser extent, through direct sales, the company said in a proxy statement.

Formed in 1992 as the result of a merger, Neoware was formerly called HDS Network Systems Inc., and changed its name to Neoware in 1997.

Neoware has bought businesses and technologies to expand its geographic reach, including the acquisitions in 2005 of Maxspeed Corp., Mangrove Systems S.A.S., TeleVideo Inc., Qualystem Technology S.A.S., and the ThinTune think client of eSeSIX Computer.

But increased competition has resulted in price reductions, lower profit margins, and loss of market share, Neoware said in a recent filing with the Securities and Exchange Commission.

In Neoware's 2007 fiscal year, revenue declined 16 percent and gross profit margin was 37 percent, compared with 41 percent in the preceding fiscal year, because of competitive pricing, reduced average selling prices, and lower revenue from direct software sales and higher overhead expenses.

Neoware had $120 million in cash, cash equivalents, and short-term investments as of Aug. 31.

Neoware shares were unchanged at $16.24 in Nasdaq trading today, and HP shares fell 35 cents to close at $50.27 on the New York Stock Exchange.