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Deutsche Bank's Key Takeaways Of The Hewlett-Packard/Aruba Networks Deal

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Hewlett-Packard Company (NYSE: HPQ) announced on Monday that it will acquire network access solutions provider Aruba Networks, Inc. (NASDAQ: ARUN) for $24.67 per share, or a total of approximately $3 billion (1.7 billion pounds) in cash.

Shares of Aruba recently traded at $24.42, down 1.55 percent.

The purchase, which was speculatively reported by Reuters and Bloomberg last week, is expected to close in the second half of Hewlett-Packard's fiscal 2015, and is anticipated to be accretive to earnings in the first full year following the close. Aruba will still be led by CEO Dominic Orr and co-founder Keerti Melkote, who will report to Hewlett-Packard's Enterprise Group leader Antonio Neri.

In a report rolled out during the morning hours, Deutsche Bank commented on the deal, which allows Hewlett-Packard to expand its networking segment revenue "by roughly one-third in a high-growth segment," improving its profitability mix, aided by Aruba's high margins.

"The deal also positions HPQ well to compete in the 802.11ac Wi-Fi segment and to address the continued growth in cloud and mobility."

The firm expects "the hardware market to continue to consolidate with a smaller number of suppliers controlling more of the total infrastructure spend. In addition, hardware is gradually moving to converged solutions, with only a handful of companies able to offer a full converged solution, including Cisco, Dell and HP."

In this context, the analysts see the acquisition of Aruba as a positive for Hewlett-Packard, which is "well positioned for the changes in the IT landscape," but still undervalued.

Latest Ratings for HPQ

DateFirmActionFromTo
Feb 2018JP MorganUpgradesNeutralOverweight
Feb 2018UBSMaintainsBuyBuy
Feb 2018BMO CapitalMaintainsMarket PerformMarket Perform

View More Analyst Ratings for HPQ
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Posted-In: Antonio Neri Deutsche Bank Dominic Orrand Keerti MelkoteAnalyst Color M&A Analyst Ratings

 

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