INSIGHT: The Pros and Cons of HP’s Aruba acquisition

The acquisition of Aruba Networks in HP's networking business, if managed properly, could be a key strategic move for the struggling tech giant.

That’s the view of research analyst firm IDC, which believes the acquisition has the potential to make HP’s positioning stronger for unified access solution requirement for 'next-gen' enterprises, giving customers a compelling solution against any other leading networking vendors, such as Cisco.

“This may be an uphill task as the market is more competitive and HP needs to move faster to get their integrated story going,” advises Surjyadeb Goswami, Research Manager, IDC CCR.

In March 2015, HP announced it would acquire Aruba, a leading wireless networking and mobility solutions company - the equity value of the transaction is approximately US$3.0 billion, and net of cash and debt approximately US$2.7 billion.

This is the largest acquisition that HP has made since it acquired Autonomy for nearly US$12 billion in 2011 with Aruba widely expected to be a part of the new HP Enterprise Company by October this year.

“It is an interesting transaction that the enterprise networking world has seen in recent times and brings several opportunities for both HP and Aruba,” Goswami adds.

According to Goswami, this acquisition will help HP close the widening gap between it and Cisco from a next generation network access solution point of view for tomorrow's mobile enterprises.

“Aruba in recent years made significant acquisition and investments to focus on location-awareness and contextual identity solutions over wireless network with Meridian, Clearpass and cloud WLAN solutions,” Goswami adds.

“This will now boost HP's wireless networking offering to enterprises with a better story around unified networking.

Goswami believes the acquisition will also give Aruba the access to HP's partner community along with a boost to their future Research and Development to develop cutting edge mobility solutions.

Challenges

One of the key challenge of this acquisition, Goswami observes, is around how Aruba is going to manage their ongoing OEM and joint partnerships with vendors like Alcatel-Lucent, Dell, Juniper and Brocade.

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“All these vendors have competing solutions with HP and Dell is the one which has a broader scale of end-to-end enterprise infrastructure competition,” he adds.

“A bigger question remains here on how HP is going to manage the expectations of these partnering vendors and associated customers.

“However, if the Aruba unit is kept as a separate entity under the HP Enterprise Company umbrella for the next few years, it could help to sort out this issue.”

HP had previously acquired Colubris and H3C to strengthen their networking portfolio, however Goswami says they failed to position the company as market leader in networking.

Also, acquiring a WLAN vendor creates a disruption in their existing wired networking portfolio; one key example is the story of Juniper – Trapeze.

“Aruba brings onto the table innovative and disruptive mobility solutions, however they have struggled with their mobility access switching portfolio,” Goswami adds.

“As it holds true for all acquisitions - with HP's ongoing R&D commitments, the Aruba offerings which requires for more R&D investments, need to be well justified and mapped into HP's solutions.

“That could be confusing for Aruba's customers.”

In many cases, Goswami says Aruba partners are already carrying competing wired networking products; positioning HP in parallel may become a challenge for those partners and create a conflict.

“This has in some cases helped competing vendors to win some of those partners support,” he adds.