Aruba Networks announced on March 2, 2015, that it is to be acquired by HP for an equity transaction in the value of about three billion dollars. This is not a small amount, comprising cash and debt paydown of $2.7B.
Aruba is a Sunnyvale-based provider of wireless networking equipment with approximately 1,800 employees and revenues of almost $750M in 2014. The company has reported compound annual revenue growth of 30% over the last five years.
According to the press release, once the acquisition has finalized, Aruba will be run as a wholly owned subsidiary of HP. The company will retain current Aruba CEO Dominc Orr and CSTO Keerti Melkote. Aruba will report to Antonio Neri, the leader of the HP Enterprise Group. This maintains organizational continuity and shows the potential for a hands-off style of management, somewhat akin to the federation model run by EMC Group.
HP has tried this before, when it purchased the fallen giant that was 3Com. It is arguable that even today it has failed to integrate the 3Com and HP ProCurve code bases into a unified single command stack. Industry watchers will hope that the distance HP is keeping from Aruba’s day-to-day management will let Aruba continue to do what it does best, but with the benefit of a federated workforce from HP Sales driving deals Aruba’s way instead of to other competitors.
What do they each get out of this deal? Aruba gets its debts written off as part of the purchase, and it gets a safety umbrella with HP as an internal customer. HP gets a leader in enterprise mobility, allowing it to aggressively attack the enterprise transition to a converged wired and wireless campus network by leveraging the Aruba brand. Aruba’s specialized sales teams focused on mobility solutions are an added bonus.
The time scale for this acquisition is quite aggressive, with an expected closing between May and October of 2015. This timetable should be achievable; this isn’t a true merger, and Aruba will be keeping many of its current processes.
Aruba’s current customer base shouldn’t be overly worried. This appears to be a win-win for them. Aruba gets access to HP’s greater portfolio of products, and it can leverage the combined budget, expertise, and resources of both HP’s and its own R&D staff. This should let Aruba bring innovation to market more quickly. HP should let it carry on very much as is.
This is an interesting acquisition for HP. It helps HP gain ground on Cisco in the mobile and wireless access space with a solution it owns, rather than relying on a subcontractor. I think that Cisco needs to keep its eye on this particular ball. Given all the other balls it’s currently watching, this may be easier said than done.
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