Hewlett Packard Enterprise Co (HPE) Buys Silicon Graphics International Corp (SGI) for $275 Million

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The deal is expected to strengthen the financial performance and the leading position of the two companies after it closes

Hewlett Packard Enterprise Co. (NYSE:HPE) announced today that it has bought Silicon Graphics International Corp. (NASDAQ:SGI) for $275 million. Silicon graphics is considered as the leading global provider of high-performance solutions for computation, data analysis, and data management. The IT company has acquired Silicon Graphics for $7.75 per share in cash, offering a 30% premium over the stock’s close on Thursday, August 11. With this deal, HP Enterprise hopes to strengthen its high-performance computing gear as well as its augmented hardware and software market.

Silicon Graphics was founded under the leadership of Jim Clark, founder of Netscape. The company had filed for bankruptcy in 2009, leading it to be acquired by Rackable Systems. The company continued to retain its brand name even after the acquisition. It is known for its computing and analytical services in business, scientific, technical, and governmental areas. The California-based company grew from bankrupt to reporting $533 million in revenues in fiscal year 2016 under Rackable Systems.

Hewlett Packard believes that the $212.31 million company would help its data centers create better business insight and value for consumers. The company stated: “HPE and SGI believe that by combining complementary product portfolios and go-to-market approaches they will be able to strengthen the leading position and financial performance of the combined business.” This means that the leaders of the company are confident this deal would increase its strength in high-performance computing segment of the server market.

A lot of companies now have to deal with massive quantities of data across all the applications and sectors. For this purpose, the businesses need secure data processing systems and quick data analytics which allow real-time processing. Now these companies are turning to high-end solutions that Hewlett Packard wants to offer using Silicon Graphics. With this accelerated demand, the data analytics division is expected to double in terms of growth and the high-performance computing segment worth $11 billion is expected to increase its compound annual growth by approximately 6-8%.

The combined portfolio of the two companies would make both private and public companies have easier access to supercomputer installations. This would enable them generate better business insights and provide them a competitive edge over rivals in the market. The post-acquisition product portfolio would be designed to efficiently help customers with complex and challenging business problems. Thus, the two companies have product portfolios which complement each other and provide real-time solutions, helping them strengthen and grow their consumer base.

Hewlett Packard Enterprise hopes its earnings would neutral in the first year of acquisition. The deal would take some time to materialize though. The deal is expected to close in the first quarter of 2017. It is currently awaiting regulatory approval and customary closing provisions, which could delay its closure.

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