Cisco Subnet An independent Cisco community View more

Aruba Networks is different than HP's failed wireless acquisitions

HP has acquired other wireless companies in the past, only to let the opportunity go to waste. What's different about its recent acquisition of Aruba Networks?

hewlet packard hp
Credit: Shutterstock

HP's plan to split into two smaller, but still massive, organizations this year has been well-documented. HP Inc. will sell personal systems and printing technologies. The other, HP Enterprise, will focus on the hardware, software, and services businesses needed to make the transition into this cloud- and mobile-driven world that we are rapidly moving into.

I like the split into two companies as it allows each entity to focus on its own markets. Lots of companies try to serve both the consumer and business markets, but very few have managed to it successfully. The "New HPs" have the opportunity to be two companies that each excel at one thing, rather than one company that is mediocre at two things.

While we're still many months from the split happening, HP has set the enterprise half up to come out of the blocks in a full sprint with the acquisition of the industry's leading wireless networking company, Aruba Networks, for about $3 billion. The deal is expected to close in the second half of the year, meaning the timing should be close to the finalization of HP's restructuring.

The acquision is a solid "win-win" for both vendors. HP has been a mainstay in networking now for years, but its primary value proposition has been "low cost" and "lifetime warranty." Also, despite holding the No. 2 position in wired networking share, HP never managed to get the wireless engine going. In 2008, HP bought a company called Colubris to jump into the Wi-Fi game. Colubris had some good technology, but HP couldn't parlay its wired success into a wireless momentum.  

Two years later, HP made a bold move by purchasing 3Com. Again, despite an excellent wired and wireless portfolio, the 3Com assets weren't enough to propel HP to the next level of networking.

So, what's different this time? Well, there are a couple of significant differences with the acquisition of Aruba. Both 3Com and Colubris were technology purchases. In fact, a year after the 3Com integration, very few of the people were left. With Aruba, HP gets great technology, arguably the best wireless portfolio in the industry. Aruba also has a team with a proven track record that knows how to succeed in the highly competitive networking market.

Over the past several years there has been a constant drumbeat of "commoditization" as a number of low-cost Wi-Fi suppliers have hit the market. Despite that and the constant threat by archrival Cisco, Aruba has not only survived, it has thrived to the point where its margins are at an all-time high. In the past, HP has acquired great technology, but with Aruba it's buying a great company and all that comes with it: technology, marketing, go-to-market, and people.

Together, HP and Aruba can deliver a complete networking portfolio – from the data center all the way to the wireless edge. To maximize the value of this portfolio, HP will smartly be keeping the Aruba brand and management team. The new combined organizations will be led by Aruba's current CEO, Dominic Orr, and CTO, Keerti Melkote, the architects of Aruba's success. The combined organizations will run as a subsidiary of HP. I believe this is the best way for HP to leverage both its current networking assets as well as the ones that come with Aruba. Put the group in the hands of people who have a history of success. Aruba was founded on a concept of being open and embracing multi-vendor environments, which has been similar to HP's philosophy, so I don't see this changing.

For Aruba, its partners, and customers, a much broader portfolio of products, including some top-quality servers and storage as well as a global services company, are now available. This has some interesting implications in many verticals for a broad "solution" sale. Consider the healthcare vertical, which is rapidly evolving into being completely digitized. The combination of networking, wireless, servers, and storage led by professional services can help many HP/Aruba customers transform their businesses. Retail, K-12, higher education, and financial services are other verticals going through similar transitions.

The only aspect of this acquisition that raises some questions is what happens with the current OEM/distribution relationships that Aruba has with companies like Alcatel-Lucent Enterprise, Dell, Brocade, and Juniper. While it's too early to tell how this plays out, it's likely that some of the partners won't be thrilled with HP's ownership of Aruba. In this case, those vendors may choose to partner with or even acquire another Wi-Fi vendor, such as Aerohive, Meru, or Ruckus. Despite the potential for some downside, I don't believe that any of the distribution partners account for more than single-digit share. The upside from exposure to HP's global channel should more than offset any downside loss from a technology partner jumping. In fact, this could strengthen both organizations' relationship with a company like Microsoft, as both have strong Lync partnerships.

This was Meg Whitman's first major acquisition, and I'll tip my hat to her, which is something I haven't done with an HP CEO in a long time. IT is shifting to a network-centric model, and having a strong wireless portfolio (including APs, security, mobile engagement, etc.) is necessary for leadership in today's market. Whitman bought the right company and is putting the right model in place for success.

To comment on this article and other Network World content, visit our Facebook page or our Twitter stream.
Must read: Hidden Cause of Slow Internet and how to fix it
Notice to our Readers
We're now using social media to take your comments and feedback. Learn more about this here.