HP in Talks to Buy Aruba – Report
Seemingly still searching for its true identity, HP is believed to be in discussions to acquire WiFi networking specialist Aruba, according to a Bloomberg report, with an announcement due as soon as next week.
The report, citing unidentified sources, suggests HP Inc. (NYSE: HPQ) is looking to bolster its networking portfolio and buy into a growing market in an effort to help fix its strained financials: HP this week reported a 5% year-on-year decline in revenues to $26.8 billion for its fiscal first quarter ending January 31 2015.
On the analyst and investor call to discuss its earnings, HP CEO and Chairman Meg Whitman noted that while results from HP's existing enterprise networking business (switches and other data center systems) were disappointing, "we're focused on winning in this business and you will continue to see us make aggressive moves over the coming quarters." (See this Seeking Alpha transcript for the full details.)
Buying the WiFi networking systems company would certainly be aggressive, as such a deal would likely cost HP up to $3 billion and perhaps even more, as Aruba Networks Inc. (Nasdaq: ARUN) is growing, profitable and in the vanguard of WiFi networking developments, along with others such as Cisco Systems Inc. (Nasdaq: CSCO) and Ruckus Wireless Inc. . (See WBA: 12 Carriers Deploying Hotspot 2.0 and Vendors Split Over New Ethernet Specs.)
Aruba posted its best ever quarter of revenues, up by 29% year-on-year to $207.8 million, for its fiscal first quarter that ended October 31, 2014. It reported an operating profit of $10.2 million for the quarter, compared with a loss a year earlier.
The company reports its fiscal second-quarter results today (Thursday) and is expected to announce another record quarter of sales. It is on course to generate revenues of around $860 million for the full year to the end of July.
With Aruba on a growth spurt and news of HP's interest leaked, the WiFi company's stock gained a massive 21% Wednesday, ending the day at $22.24 and giving the company a market capitalization of about $2.5 billion.
HP, meanwhile, is still a company in flux. It is set to split into two separate entities, one for personal systems and printing, and the other, to be called HP Enterprise, which Whitman will run, to focus on networking, storage and software to support SDN and NFV deployments. (See HP to Split Into Two Companies.)
The CEO clearly has her eyes on growth through M&A, though. In November last year, Whitman noted that HP was "interested in acquiring assets if it's the right thing to do for what will become HP, Inc. [the personal systems/printing spinoff] or HP Enterprise." (See HP Sees Networking Revenue Up Ahead of Split.)
If the speculation is accurate, news of a networking acquisition might just drop during the wireless zoo that is Mobile World Congress, where HP is keen to show off other parts of its portfolio. (See HP Gives Carriers IoT Management Smarts.)
— Ray Le Maistre, 
, Editor-in-Chief, Light Reading
