Hewlett-Packard is buying Wi-Fi access point vendor Aruba Networks for $2.7 billion. The network-equipment giant said the shift to mobile is taxing its enterprise network infrastructure and that the Aruba purchase will help it offer integrated and secure networking solutions to transition legacy systems to the wireless edge.
Aruba is a very significant player in the market for wireless local area networks, second only to Cisco by most estimates. While HP has been a reseller of Aruba’s Instant WLAN platform for several months, the company also sells Wi-Fi networking gear on its own.
“Based on data from Infonetics, HP has roughly a 5% WLAN revenue share globally compared to Aruba’s 10% in WLAN, and its WLAN share shrank over the past several years as Aruba’s has grown, making Aruba the de facto No. 2 player to Cisco in the market,” said analyst Travis McCourt of Raymond James Equity Research. McCourt added that about half of HP’s current WLAN revenue comes from its stake in a Chinese networking business that is thought to be for sale.
“One easily comes to the conclusion that it either needs to get bigger in WLAN or get out of the market,” said McCourt. He added that Aruba can accurately be described as more of a software company than a commodity hardware vendor and that the company has made “very meaningful investments in security and mobile device management.”
Aruba’s competitors will definitely feel the impact of today’s news. Market leader Cisco competed with HP and Aruba separately in different markets, and now will face the two as a combined force. Smaller Wi-Fi access point vendors are also taking note.
“The acquisition of Aruba by HP will have a dramatic impact on the Wi-Fi market,” said Xirrus CEO Shane Buckley. “Aruba is the second-largest WLAN vendor by market share. HP currently sells Wi-Fi products gained through their previous acquisitions of Colubris and 3Com. They also have an OEM relationship with Aruba. This acquisition will likely have an impact on both vendors’ Wi-Fi product portfolios, which may cause disruptions to existing customers. Since Aruba also OEMs their products to HP competitors such as Dell, Brocade and Alcatel-Lucent, this transaction creates as many questions for them as it creates for current HP and Aruba customers.”
Aruba’s CEO Dominic Orr and its Chief Strategy and Technology Officer Keerti Melkote will report to Antonio Neri, head of HP’s enterprise group. Orr said he looks forward to combining his company’s “best-of-breed mobility hardware and software solutions with HP’s leading switching portfolio.” HP CEO Meg Whitman offered the same rationale for the merger.
“Enterprises are facing a mobile-first world and are looking for solutions that help them transition legacy investments to the new style of IT,” said Whitman. “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.”
Image source: glassdoor.com
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