Home & Office

HP confirms Aruba Networks purchase, eyes bulked up networking unit

The deal, valued at $3 billion and $2.7 billion net of debt and cash, gives HP more heft to tackle campus networks and wireless technology.
Written by Larry Dignan, Contributor

Hewlett-Packard on Monday confirmed plans to buy Aruba Networks in a deal valued at $3 billion. HP said the deal will bolster its wireless networking capabilities and allow it to better sell converged gear.

Under terms of the transaction, HP will buy Aruba for $24.67 in cash. The purchase is worth $2.7 billion net of cash and debt.

Aruba has annual revenue of $729 billion and is big enough to move the needle for HP's networking business yet can still benefit from scale.

According to the companies, the converged campus business---essentially enterprise wireless equipment---will be led by Aruba CEO Dominic Orr and strategy chief Keerti Melkote. The Aruba business will be lumped into HP's enterprise business.

The deal is expected to close in the second half of HP's fiscal year. Word of the purchase surfaced last week.

In a statement, HP said the deal will bolster the networking unit and add to earnings.

HP outlined the following moving parts to justify the Aruba purchase:

  • Next-gen 802.11ac Wi-Fi will support better access and mobility on corporate campuses.
  • HP can integrate Aruba's gear with its broader enterprise offerings.
  • CEO Meg Whitman said Aruba's wireless mobility equipment will blend well with HP's switching portfolio.

HP's channel will give Aruba more sales throughput.

Analysts were mixed on what Aruba brings to the table for HP. For instance, Cantor Fitzgerald analyst Brian White noted that other areas are more pressing for HP. White said in a research note:

Although we believe this deal expands HP's networking portfolio, we believe HP's capital (especially at an enterprise value to 2014 revenue of 3.7x) would be better spent on cloud and Big Data software-related vendors.

Aruba, which competes with Ruckus Wireless and Cisco, does give HP's networking business a shot in the arm. In HP's most recent quarter, the networking business was hampered by "execution issues" in the U.S. and China. HP built its networking portfolio over time, but the 2010 acquisition of 3Com is what gave it scale.

IDC said Aruba has 11.5 percent of the wireless local area network (WLAN) market, followed by Ruckus at 6.3 percent and HP at 5.8 percent. Cisco has 48.4 percent of the WLAN market. With Aruba, HP would have a better share of the market.

Editorial standards