In this post, we address frequently asked questions about HPE-Aruba’s acquisition of Silver Peak.

As both industry commentators and consultants advising on similar mergers and acquisitions, Cavell finds it important to provide both the facts about the deal and critical opinion on value and the future of the businesses.

In September 2020, Hewlett Packard Enterprises (HPE) acquired Silver Peak systems for $925 million.

The company was then made part of the HPE-Aruba subsidiary company.

Silver Peak is a company that creates products for Wide Area Networks (WANs), with a special focus on WAN optimisation and SD-WAN.

Silver Peak has strong industry partnerships with companies like Dell and other leading WAN and IT infrastructure providers. Dell uses Silver Peak to improve the performance of its networking and storage offerings across the globe.

Silver Peak is a specialist in this area of technology and considered to be one of the leading WAN optimisation and SD-WAN expert companies.

This is the primary reason for the acquisition as Aruba’s speciality has focused on branch connectivity and Wi-Fi.

The Silver Peak acquisition brings both strong customers and a strong WAN technology.

This is vital for Aruba’s continued competition with players like Cisco, VMware, and Juniper.

Silver Peak was acquired for $925 million, in 2020.

Was this a fair price?

This is a difficult number to judge for two reasons:

1) Many of the acquisitions in this space are private companies and the numbers are not disclosed.

2) While Cavell has a window into Silver Peak’s business, customer base, etc., it is hard to say how much value HPE placed on the existing business. It is likely that much of the value was in the technology and skills gained. From Cavell’s perspective, this acquisition was skills & technology rather than customer focused.

In that context, looking at the potential tools that Aruba has acquired, as well as where this could lead the company in the future, Cavell predicts HPE is quite happy with the sum paid.

Silver Peak was not a public company at the time of its purchase by HPE in 2020. It was a private equity funded company that had raised $175.9m from seven investors across 12 funding rounds.

However, HPE is a public company, which is why the amount paid for Silver Peak – $925 million – became public at the time of sale.

It is worth noting that this amount is one third of the $3 billion US that HPE paid in 2015 to acquire Aruba. Demonstrating the perceived value of Silver Peak to the subsidiary.

It is hard to see the direct impact of the Silver Peak purchase on HPE stock. HPE is a large company with many divisions and factors affecting stock performance.

But HPE stock was holding steady around $9 USD in the lead up the acquisition and then surged to $16 USD in Feb 2021. While this surge was due to broader market forces amongst other things, part of the investor consideration must be HPEs acquisition strategy.

HPE purchased Aruba in in 2015 for around $3 billion USD (around $24.67 a share).

The primary driver for this acquisition was the changing demands on business networks.

HPE already had a strong switching business for connecting office networks. But it was seeing the rise in demand for in-building Wi-Fi services and wanted an answer to this.

This continues to be relevant as the use of in-office Wi-Fi continues to surge and employees get more devices.

Looking back from early 2021, we can say that this was an interesting move that has seen HPE double down on its networking business.

This will ensure HPE can stay competitive in the branch and Wi-Fi areas against the encroachment of companies like Cisco Meraki and Fortinet.