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Technology

Hewlett Packard Enterprise Co (HPE) Buys Nutanix Inc (NTNX) Rival SimpliVity for $650 Million

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HPE’s SimpliVity acquisition will enhance its access to hyperconverged market, which is expected to grow at 25% CAGR

Hewlett Packard Enterprise Co (NYSE:HPE) announced on January 17 that it has signed a definitive agreement to acquire Nutanix Inc’s (NTNX) rival, SimpliVity –  a market leading supplier of software-defined, hyper-converged infrastructure – for $650 million. Under this agreement, Hewlett Packard and its partner will develop the market’s first built-for-business hyper-converged offering.

According to HPE CEO, Meg Whitman, the deal expands the company’s software-defined abilities. It is also consistent with its strategy to develop Hybrid IT simple, providing consumers with user-friendly interface and a more resilient and secure infrastructure. The deal is also likely to expand the company’s offerings and strengthen its enterprise data services.

It will also enhance HPE’s access to hyper-converged market, which is expected to grow at 25% compound annual growth rate and reach $6 billion by calendar year 2020 (CY20). Consequently, the post-acquisition company is likely to witness accelerating financial performance going forward.

Moreover, SimpliVity’s CEP, Doron Kempel is also optimistic about the deal. He believes that Hewlett Packard acquisition will provide SimpliVity with complementary technology coupled with widespread partner channel and extensive sales reach that it requires for delivering world-class hybrid IT solutions to its customers.

The California based-company expects to close the deal during the second quarter of fiscal year 2017 (2QFY17). Within two months of completion of transaction, HPE plans to offer SimpliVity Omni Stack software. It further intends to market a greater range of integrated systems during the second half of FY17. The deal is currently subject to customary closing conditions and regulatory approval.

Consequently, investors continue to be bullish over HPE. Furthermore, out of 30 Street analysts covering the stock, 12 rated it as a Buy, three tagged it as Overweight, 13 recommended a Hold, and one each rated the shares as Underweight and Sell, respectively. The stock has a 12-month average PT of $24.63 with 8.6% upside potential over Tuesday’s closing price.

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