Report: HP In Talks To Buy Aruba Networks

Hewlett-Packard is in talks to acquire wireless networking vendor Aruba Networks, according to a report from Bloomberg Business Wednesday.

Bloomberg reported that the deal hasn't been completed and the talks could fall through.

Aruba shares soared 21 percent or $3.86 to close at $22.24 Wednesday on the report of the potential buyout. That closing price puts Aruba's market value at $2.44 billion.

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HP shares, meanwhile, closed down nine percent or $3.82 to $34.67 Wednesday. The company Tuesday reported non-GAAP diluted earnings of 92 cents per share on a five percent drop in sales to $26.8 billion for its first fiscal quarter ended Jan. 31. HP's networking business was down 11 percent in the quarter.

HP and Aruba would not comment.

HP partners said if the deal is finalized, it would provide them with an innovative offering to grab wireless share from Cisco Systems.

"Aruba would be a good acquisition for HP," said Bob Venero, CEO of Future Tech, a Holbrook, N.Y. -based HP and Aruba partner. "Aruba has always been on the leading edge of wireless. This is a company that can light up an entire building from an outside pedestal rather than using access points. They have done a lot of unique and interesting things .We have a lot of customers that use Aruba rather than Cisco."

Venero said the deal would instantly make HP a strong alternative to Cisco in the wireless networking market. "When you think about HP, you don't think of them as a wireless networking company," he said. "This would give them a branded wireless offering."

A top executive for another HP partner, who did not want to be identified, said the deal would give HP a product portfolio that would be a "thorn" in the side of Cisco. "This would be a very disruptive deal," he said. "It makes total sense. HP needs a head-to-head wireless story against Cisco. This would certainly give them that. It shows that they are trying to figure out the networking strategy as they build out the Enterprise Group product portfolio."

HP CEO Meg Whitman told CRN Wednesday that HP is doubling down on networking and realigning sale incentives after the drop in HP networking sales in the most recent quarter. "We are on it, and I think we will take share back again from Cisco," she said.

One top executive for an Aruba solution provider, who did not want to be identified, said if the deal does come to fruition his company would likely be looking for a new wireless vendor.

"I don't know what kind of appetite my company is going to have in creating a strategic partnership with Hewlett-Packard when we already have strategic partnerships with many of HP's competitors -- Juniper and Brocade," said the executive. "If this [acquisition] goes through, it's going to have some impact on our business, and one of two things is going to happen: we're either going to figure out if we can work with HP on the wireless products or we're going to recruit another wireless vendor."

Although he sees the benefit for HP in acquiring a stronger wireless network portfolio, he sees a big potential fallout from the deal.

"Aruba has gone to great lengths to develop these strategic alliances with Juniper, Brocade, even with Dell, are they just going to throw it away? We already have strategic partnerships with many of HP's competitors," he said. "There's no prior history with Aruba and HP. If a merger or acquisition were to happen for Aruba, I'd rather see it with a different company ... [If it does happen], it's going to have a ripple effect for a lot of people."

PUBLISHED FEB. 25, 2015