HP acquires wireless network company Aruba for $2.7 billion

By | March 3, 2015

Hewlett-Packard Co. have finalized to acquire Aruba Networks Inc., a maker of wireless-network infrastructure used in hotel, universities and shopping malls, for $2.7 billion in cash to boost up its networking business. The world’s second largest PC maker has had a dismal record for big acquisitions, having written off multibillion-dollar acquisitions of Autonomy and technology outsourcing provider EDS, which it bought in 2008.

Hp buys aruba

The California based company, Aruba, has grown as more people are using mobile devices at work, school and elsewhere. Aruba may help HP capitalize on that trend, which has cut into sales of traditional HP products such as desktop computers.

Also, the deal could help HP compete with tech rivals such as Cisco Systems and gain new access to Asian ,markets particularly in China. Cisco currently sells about half of all commercial wireless networking gear worldwide, according to UBS analyst Amitabh Passi. He estimates HP and Aruba combined will account for 20% of global sales for such systems.

This is the largest acquisition in many years for HP, where Chief Executive Officer Meg Whitman has been focused on cutting costs and returning the business to growth. To increase the tech porfolio for the business customers, HP is planning to split itself into two companies  –  one focused on selling computer systems and software to businesses, and the other selling personal computers and printers – later this year.

Given the pending split, a lower profit forecast and questions about its ability to adapt in a shifting corporate market, a multibillion-dollar purchase right may be risky. Yet Whitman might be targeting Wi-Fi networking-gear maker Aruba to tackle those very challenges, chasing revenue in a growing market and in China.

With the Aruba deal, HP is paying $24.67 in cash for each Aruba share. That is slightly below Aruba’s closing price of $24.81 on Friday, but marks a 37 percent premium to the roughly $18 that Aruba shares were trading for before talks with HP were reported last week.

Boards of both companies have approved the deal, which they said would be worth about $3 billion after factoring in cash and debt on Aruba’s balance sheet. Aruba had $729 million in sales last year.

In midday trading, Aruba Networks Inc. shares fell 40 cents, or 1.6 percent, to $24.41, Hewlett-Packard Co. shares slipped 19 cents to $34.65.