Hewlett-Packard (HPQ, Financial), a well-known American Multinational Information Technology corporation, specializes in developing and manufacturing computing, data storage, designing software and delivering services.
Hewlett-Packard is taking a leap in its mobile computing business by buying a California based Aruba Networks (ARUN, Financial) a Wi-Fi network gear maker. It has been priced for $24.67 per share, which is 34 percent to its premium to its closing in February. The total estimated value of the deal is $3 billion. It was announced a day before its stock spiked up. It is supposed to be the biggest deal for the world’s second-leading PC maker ever since it had a mismanaged acquisition of Britain’s Autonomy PLC in 2011.
HP has always recognized profit and seeks new opportunities for growth. HP’s main strategy for growth is to look for lucrative opportunities for acquisitions. It has made QVmark in mergers and acquisitions. HP bought companies like EDS, when it was already written off.
With buying Aruba, HP is giving a boost to its share of Wireless Local Area Network (WLAN) market as more companies enable their staffs to access work systems through their wireless devices.
How will the new Hewlett-Packard look now?
HP is reported to have a lot of business and legal pressure. Businesswise, the company is lagging behind in mobile computing at this time when consumers are not ready to wait. They are continuously moving and upgrading their gadgets. They have moved way ahead in terms of smart phones and tables. The world of technology is transforming constantly. After struggling to adapt to a new era of mobile and web computing in the recent past, PC major Hewlett-Packard reportedly planned to split itself into two different stand-alone companies. One of which will be computing business and another as printer.
So, how does the company look today? The PC and printer division has always been a core and critical division of the company. The CEO Meg Whitman herself agreed to the fact that these business verticals have offered compelling returns, and she is ready to shift the gear now.
Analysis over the acquisition
HP is far behind the market leader Cisco (CSCO, Financial) Systems in the business of hardware and networking. The Aruba acquisition will turn out to be fruitful and profit making and will help HP gain more market share. It will add high revenue to the mix in a way that is going to help the company reach to its goal faster and smoother.
Aruba has a vast client base to sells its Wi-Fi gear. The major clients include California State University and Dalian Wanda Group, which has a grip on China’s biggest property developer and largest chain of cinema.
The purchase will help HP to stand for E-Rate, the largest U.S. educational technology subsidy program. This is a catalyst for the high-speed internet among schools and libraries for better and faster networking.
Aruba’s share shows a high of as much as 28 percent to $23.49 in evening trading on the NASDAQ. HP’s stock was marginally slower by 10 percent to $34.63 on the New York Stock Exchange (NYSE). The talks with Aruba, which has a market cap of about $2 billion (roughly Rs. 1, 23,884 crores), are not complete and might still fall through, as reported. HP cash pile stood at $12.9 billion by the end of January.
HP says the combination will enable it to help companies improve their wireless capabilities in this mobile-first world. CEO Meg Whitman says, "By combining Aruba's world-class wireless mobility solutions with HP's leading switching portfolio, HP will offer the simplest, most secure networking solutions to help enterprises easily deploy next-generation mobile networks."
