Why Did HP Acquire Aruba Networks?

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Acquiring Aruba would make HP a more potent competitor to Cisco

In the previous part of this series, we discussed how HP (HPQ) acquired Aruba (ARUN) to become an important player in the enterprise wireless network market. According to a report from IDC, Cisco’s share in this market declined from 51.6% in 3Q13 to 48.3% in 3Q14, while Aruba’s share increased from 9.4% to 11.5% during the same period. Meanwhile, Ruckus Wireless’s (RKUS) market share also increased from 5.6% to 6.3%. The chart below shows HP as the fourth-ranked player in this market.

The report also mentioned that the overall enterprise wireless network segment increased by a year-over-year rate of 9.6% in 3Q14, while the consumer wireless segment grew by 4.8%. The bulk of the growth in the enterprise segment came from Latin America, which grew by a year-over-year rate of 27.3%. The EMEA region grew by 15%, while North America grew by 7.5% and the Asia-Pacific region grew by 4.5%.

These findings show that Aruba is fast becoming a major player in this market, which is likely why HP would have been interested in buying the company. Acquiring Aruba would make HP a more potent competitor to Cisco (CSCO) in this space. HP’s acquisition of Aruba for $3 billion is HP’s largest acquisition since it acquired Autonomy for $12 billion in 2011.

Aruba will become part of HP Enterprise

Last year in October, HP announced its decision to break into two separate publicly traded companies. HP would form to include HP’s computer or PC and printer business. HP Enterprise will include the company’s corporate hardware, computer servers, data storage, equipment-software, and services business. Aruba will become part of HP Enterprise.

If you’re bullish about HP, you can invest in the NASDAQ Technology Dividend Index Fund (TDIV). TDIV invests 2.63% of its holdings in HP.

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