Palo Alto, Calif. – HP is acquiring Aruba Networks, a provider of network access solutions for the mobile enterprise, in a deal valued at about $3 billion, positioning HP as an industry leader in enterprise mobility. Both companies expect the combination of their complementary product portfolios and go-to-market strategies will drive revenue growth and strengthen the financial performance of the combined HP Networking business, and create a leading competitor in the $18 billion campus networking sector.
Sunnyvale, Calif.-based Aruba reported revenues of $729 million in fiscal 2014, with a compound annual growth rate (CAGR) of 30 percent over the last five years. HP is buying Aruba for $24.67 per share in cash with an equity value of about $3.0 billion. Both companies’ boards of directors have approved the deal. The new combined organization will be led by Aruba’s chief executive officer Dominic Orr, and chief strategy and technology officer, Keerti Melkote, reporting to Antonio Neri, leader of HP Enterprise Group.
In the midst of its five-year turnaround plan, HP also reported first quarter, ended January 31, 2015, net revenue of $26.8 billion, down five percent from the prior-year period and down two percent on a constant currency basis. “With the first quarter of fiscal 2015 now behind us, the HP turnaround remains on track,” said Meg Whitman, chairman, president and chief executive officer, HP, in a press release. “We grew operating profit margins across all of our major business segments, increased investment in innovation, and executed well across key areas of our portfolio and in our separation activities. Our progress continues as we head into Q2.”
The acquisition is not surprising for a few reasons. On the technology side, companies continue to move at a fast pace to mobility workplaces, which is driving the need for integrated and secure networking solutions with higher capability as companies move from a world of legacy systems to next-generation wireless networking. Mobile data traffic, alone, is forecast to grow in the double digits in 2015, according to Gartner Inc. “Newer and faster networks, a rise in the number of users of these networks, and more affordable 3G and 4G handsets will help to increase data traffic,” said Jessica Ekholm, research director at Gartner, in a press release.
“Enterprises are facing a mobile-first world and are looking for solutions that help them transition legacy investments to the new style of IT,” said Whitman, in a press release. “By combining Aruba’s world-class wireless mobility solutions with HP’s leading switching portfolio, HP will offer the simplest, most secure networking solutions to help enterprises easily deploy next-generation mobile networks.”
Secondly, HP announced last year its plan to split the company into two by the end of its fiscal 2015. At the time of the announcement in October 2014, Whitman said it would put the company in a better position to make acquisitions to address customers’ demand.
The two separate and publically-traded Fortune 50 companies — HP Inc., focused on the PC and printer businesses, and Hewlett-Packard Enterprise, comprised of servers, storage, networking, converged systems, services and its Open Stack Helion cloud platform – came at a time when HP approached its fourth year of its five-year turnaround. Part of the turnaround has included a large number of layoffs as well as a rebuilding its relationships with customers and partners.
As part of its relationship building, HP overhauled its HP PartnerOne program to better support its channel partners for both traditional networking products and services and emerging high-growth IT technologies, including cloud computing. One of HP’s biggest focus areas is helping channel partners capitalize on the “New Style of IT,” with new offerings focused on the cloud, security, big data, and mobility.
The turnaround has not been an easy one. In addition to multiple layoffs, HP faced several lawsuits over the past few years. The company had to pay about $108 million to two U.S. government agencies as a result of a U.S. Department of Justice and U.S. Securities and Exchange Commission investigation of potential violations of the Foreign Corrupt Practices Act. The company also settled a shareholder lawsuit last year over the very messy Autonomy acquisition.
The Aruba transaction is expected to close in the second half of HP’s fiscal year 2015.