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.
Who bought Silver Peak?
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 acquisition price
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.
Is Silver Peak a public company?
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.
Who bought Aruba?
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.
From our discussions with service providers in 2020, VeloCloud and Cisco came up often. But Silver Peak also featured in discussions of movers and shakers in the market.
Aruba, aside from its own marketing, did not come up as often in our industry investigations. So, leveraging the Silver Peak brand will help boost Aruba’s visibility.
It is our perspective that while Aruba had strong branch, edge, Wi-Fi, and IoT management technology, it was lacking on the networking side.
This, of course, has now completely changed.
Adding in the capabilities of Silver Peak will give HPE in its President and CEO Antonio Neri’s own words, “Critical capabilities that will help our customers modernize and transform their networks to securely connect any edge to any cloud.”
It has built a strong business, holding about 7.4% of the market share for SD-WAN according to a 2020 report by IDC. A chart, it is worth noting, that HPE did not feature on, despite having added SD-WAN to its Aruba offering before this acquisition.
So, the takeaways are that we expect HPE to maintain Silver Peak’s existing customers. There is no reason to neglect them.
We expect the combination of HPE’s customers will increase the market share that Silver Peak demonstrated.
Cavell is also optimistic that this company will be (assuming integration goes well) a powerful force in the market.
There is a large appetite for edge-to-cloud support and intelligent management of networks, and it only seems to be growing.
But, even with the power of both companies, competition is still going to be fierce in this space.
While offering good edge-to-cloud support is important, it may not be enough.
We have already seen big players like VMWare’s VeloCloud acquiring Nyansa, and Cisco acquiring Thousand Eyes.
These acquisitions were to enable next level services like co-managed and automated networks.
Will HPE be building or acquiring similar technology shortly to compete in that field as well?
We are going beyond the stage where edge-to-cloud data gathering and awareness is enough, to one where you need a strategy for using that data.
So that sort of strategy/acquisition may be necessary for HPE to compete in this area at the level it wants to.
Cavell provides due diligence and advice for businesses going through mergers or acquisitions.
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