Hewlett-Packard acquires Aruba Networks for $2.7 bn plus debt

Hewlett-Packard has finalised the acquisition of wireless networking company Aruba Networks for about $2.7 billion, making it HP's first major acquisition since its disastrous 2011 acquisition of UK software company, Autonomy (See: US judge questions HP's agreement with shareholders over Autonomy).

The Sunnyvale, California-based Aruba Networks makes Wi-Fi networking systems for shopping malls, corporate campuses, hotels and universities.

The company has expanded its business with more people taking to mobile devices at work, school and elsewhere. Aruba might help HP ride the mobile trend that had dented traditional HP product sales such as desktop computers.

The deal could also help HP take on tech rivals including Cisco Systems and get entry into Asian markets, particularly in China.

Cisco currently sold about half of all commercial wireless networking gear worldwide, according UBS analyst Amitabh Passi. He estimates HP and Aruba would, between them, account for 20 per cent of global sales for such systems.

HP is keen to expand its tech portfolio for business customers at a time when it is gearing up for splitting itself into two companies - one focused on sales of computer systems and software to businesses, and the other sales of personal computers and printers  (Hewlett-Packard to split corporate hardware and PC and printer businesses)  as part of HP CEO Meg Whitman's plan for responding to a recent sales decline.

Aruba investors would get $24.67 a share, the companies said yesterday in a statement. Including debt and cash, the deal had been valued at $3 billion.

Aruba shares retreated less than 1 per cent to $24.65 at the close in New York. The stock had surged 21 per cent Wednesday after reports of the potential acquisition.

This is the largest acquisition in several years for Hewlett-Packard, where Whitman had been focused on cutting costs and steering the company towards growth.

According to Bill Kreher, an analyst at Edward Jones & Co, the world continued to move quickly and HP needed to move with focus, Bloomberg reported. Kreher has a hold rating on the stock. He added, the company had to rely on prudent acquisitions to buy as opposed to build their presence.

Hewlett-Packard's networking business which reported sales of $562 million in the quarter that ended in January, an 11 per cent decline from a year earlier, would get a boost from the acquisition.

Aruba's total sales stood at $207.8 million for the quarter that closed 31, October representing a growth of 29 per cent.