JP Morgan Alert: Hewlett-Packard, Aruba Networks Deal Will be Margin Accretive

Hewlett-Packard Company HPQ is in talks to acquire Aruba Networks, Inc. ARUN, according to Bloomberg News. The news comes one day after HP reported earnings that disappointed the street, causing the stock to fall $4 per share, or 10 percent. Aruba Networks gained more than 20 percent following the report to close Wednesday at $22.24 – a market capitalization of $2.44 billion.

JP Morgan Analyst Rod Hall noted the HP, Aruba deal as both revenue and margin accretive, while providing HP with a greater penetration into the wireless networking market. A combined HP, Aruba company would have 8.6 percent market share, compared with HP’s 2.6 percent market share at present. Cisco Systems, Inc. CSCO is the giant in the room, holding a 28.7 percent share, JP Morgan said.

According to the Bloomberg report, a deal could be announced as early as next week. Yesterday, HP CEO Meg Whitman said the company is in a “position where we can actually make acquisitions.”

Aruba Networks reports earnings after the close today. The conference call is sure to include questions on the reports.