HP in deal to buy network gear maker

Hewlett-Packard Co said on Monday that it would buy Wi-Fi network gear maker Aruba Networks Inc for about $2.7 billion, the biggest deal for the world’s No. 2 PC maker since its botched acquisition of Britain’s Autonomy Plc in 2011.

HP 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.

The purchase of Aruba would help HP boost its share in the wireless local area network (WLAN) market as more companies allow employees to access work systems through their wireless devices.

“I think it will add a layer of high-growth revenue to the mix in a way it helps HP reach its goal of growing faster,” Atlantic Equities analyst Josep Bori told Reuters.

“HP is way behind market leader Cisco Systems Inc in the networking business, and the Aruba acquisition would help it to gain a little more market share,’’ he said.

“HP has a 4-5% share of the enterprise WLAN market, compared with Aruba’s 10-13%,’’ FBN Capital Markets analyst Shebly Seyrafi estimated in a note dated Feb 27.

The WLAN market is estimated to grow 40% to about $13 billion in 2019, according to market research firm Dell’Oro Group.

HP, which has struggled to adapt to mobile and online computing, plans to separate its computer and printer businesses from its corporate hardware and services operations this year.

Aruba sells Wi-Fi gear to a wide range of clients including California State University and Dalian Wanda Group, which controls China’s biggest property developer and largest cinema chain.

“The purchase will also help HP better compete for E-Rate — the largest US educational technology subsidy programme — which helps connect schools and public libraries to high-speed internet,’’ JMP Securities analyst Erik Suppiger said.

In December, the Federal Communications Commission voted to raise funding for the E-Rate programme by $1.5 billion to $3.9 billion.

The all-cash offer of $24.67 per share is a premium of 34.4% to Aruba’s close on Feb 24, the day before Bloomberg reported about a possible deal.