HP to buy Wi-Fi infrastructure company Aruba in $2.4bn deal

Reports indicate ongoing talks between the two companies - with deal as early as next week

Just days after posting quarterly results showing revenue drops almost across the board, rumours have emerged that systems giant HP is planning to buy Wi-Fi equipment maker Aruba Networks.

Such a deal would complement HP's own high-end networking equipment business as the company looks to spin-out its PC and printers products business to focus on enterprise-grade products and services.

A price of $2.4bn has been pinned on a deal. Aruba provides Wi-Fi products and services targeted at particular vertical sectors, such as retail and healthcare. Its revenues grew by 29 per cent in its fiscal 2015 first quarter results, posting revenues of $207.8m.

However, HP's recent record of acquisitions is ill-starred, with its 2008 acquisition of services company EDS for $13.9bn coming just as the global financial crisis was starting to squeeze IT outsourcing and software implementation budgets, followed by the rise of cloud computing, which has continued to make trading difficult for all IT services companies.

Its $11.7bn acquisition of Autonomy was even more disastrous, with HP accusing Autonomy's former management of engaging in accounting fraud and the company writing off $8.8bn in value as a result in 2012. Oracle founder Larry Ellison, however, had earlier rejected a takeover of Autonomy for half the price that HP paid, claiming that it was over-valued.

There are also a number of risks in HP's latest proposed acquisition: Aruba's own Wi-Fi infrastructure technology and services may be vulnerable to lower data pricing on 3G and 4G networks, especially outside the US where prices are kept artificially high by a combination of poor regulation and inadequate competition.

A deal, however, may be announced as early as next week, according to the Bloomberg newswire, and Whitman has highlighted networking as a key area of investment for HP. "Networking is a very important business to HP," Whitman said in the company's first-quarter results conference call earlier this week. "We will continue to invest in these businesses."