Editor’s note: Jessica Breen is an enterprise software analysts for Software Business Quartertly and Technology Business Research.

HAMPTON, N.H. – Following the appointment of new CEO Leo Apotheker and software acquisitions including: ArcSight, Fortify, and Stratavia; HP Software revenue growth inched along at 0.7 percent year-to-year as the company has yet to use software more strategically to support corporate growth.

HP Software reported on Monday fourth quarter revenue of $974 million and full year revenue of $3.59 billion. Full year revenue growth remained flat year-to-year as software is used to attach value to hardware and services. (Read LTW’s coverage of the HP earnings report here.)

HP’s (NYSE: HPQ) Business Technology Optimization (BTO) portfolio grew 3.6 percent year-to-year to $684 million as enterprise application management and cloud software drives growth; however, the ‘Other’ portfolio declined 5.5 percent year-to-year to $290 million as HP Software has yet to realize the value of its communications and business intelligence software.

TBR believes HP is aware of the untapped potential its software division can provide to support growth while still adding value to its other segments, evident by the rapid software acquisitions and the appointment of former SAP CEO Apotheker.

HP Software will likely begin to explore software opportunities across 2011; however, TBR does not expect to see a quick change in HP Software’s growth trajectory.

Apotheker fills a gap in HP’s expertise; HP is now a three-way player

HP is confident that hardware and services are on positive trajectories, and is once again filling out its portfolio by strengthening the third leg of the IT stack: software. The experience Apotheker brings in running and selling an enterprise software company is directly beneficial to HP. Given the strong margin contribution of enterprise software, TBR believes Apotheker will reinvigorate the Software portfolio under the HP Software and the HP Enterprise Server, Storage and Networking (ESS&N) divisions as a highly profitable lever that can help to quickly lift overall HP profitability.

The appointment reinforces the perceived importance of outside experience in running the software business following the hiring of ex-Microsoft executive Bill Veghte as the head of the HP Software division. Veghte is a 19-year Microsoft veteran who recently headed the Windows franchise.

Security enhances value across the entire software portfolio

HP acquired ArcSight, a security and network solutions company, for $1.5 billion following its most recent acquisitions of Fortify and Stratavia in August. Consolidation of security solutions is in full swing as systems management vendors make strategic purchases to diversify the portfolio and enable better end-to-end offerings.

In May 2010, Oracle acquired Secerno to provide database security while IBM purchased Ounce Labs in 2009. Intel also purchased McAfee for its leadership in security in August. ArcSight is highly complementary to HP’s existing security portfolio as HP was formerly a reseller of ArcSight appliances that provide enhanced visibility and correlation techniques to provide customers with advanced security tools.

TBR believes HP Software will integrate ArcSight along with Fortify and existing security solutions to drive stronger capabilities in security to enhance solutions, rather than build out a separate security business. TBR believes HP Software will try to bundle security to sell enterprise solutions to ArcSight’s existing customer base.

ArcSight brings with it a considerable presence in large enterprise, some of which include Verizon, Securities and Exchange Commission, Target, and Pfizer. TBR believes ArcSight will also provide enhanced capabilities to drive Converged Infrastructure and HP’s Instant On strategies to attract greater customer growth as security solutions address the primary customer pain point in cloud adoption.

Get the latest news alerts: Follow LTW at Twitter.