HP in Talks to Buy Aruba Networks for Wi-Fi Infrastructure

Hewlett-Packard Co. is in talks to acquire Aruba Networks Inc., a maker of wireless-network infrastructure used by hotels, universities and shopping malls, people with knowledge of the matter said.

The purchase may be announced as soon as next week, said one of the people, asking not to be identified discussing private information. The deal hasn’t been completed and the talks could still fall through.

Aruba rose 21 percent to $22.24 in New York trading Wednesday, giving the company a market value of about $2.4 billion.

This would be the largest acquisition in several years for Hewlett-Packard, where Chief Executive Officer Meg Whitman has been focused on cutting costs and returning the business to growth. Hewlett-Packard is planning to split itself in two later this year, with Whitman remaining in charge of the business focused on corporate customers.

Hewlett-Packard is “now in a position where we can actually make acquisitions, which we couldn’t when we started,” Whitman said in an interview on Tuesday, after the company released its quarterly earnings.

Howard Clabo, a Hewlett-Packard spokesman, declined to comment, as did Pavel Radda, a spokesman for Aruba.

Aruba makes hardware and software used to build Wi-Fi networks for customers including China’s Dalian Wanda Group Co., which uses the technology in shopping malls. Other customers include California State University at Los Angeles and the Edzan Hotels & Suites in Qatar.

The company’s annual sales are projected to grow to more than $1 billion by fiscal 2017, the average of eight analysts’ estimates compiled by Bloomberg show, from $729 million in the year through July.

Small Addition

Hewlett-Packard’s entire networking group contributed $562 million in sales for the company’s first quarter, down 11 percent from the year-earlier period. The division has faced challenges in the U.S. due to changes in the types of networking technology being bought, and in China due to management changes at its H3C networking unit. HP is in the process of selling its majority stake in H3C, people familiar with the situation have said.

Aruba would be a small addition to Hewlett-Packard’s overall business. The Palo Alto, California-based company reported sales for the first quarter of $26.8 billion. After its forecast for full-year profits fell short of analysts’ estimates, Hewlett-Packard’s shares fell 9.9 percent Wednesday, to $34.67. At that price it has a market value of about $63 billion.

Hewlett-Packard has a checkered past when it comes to deals. In the decade before Whitman took over, the company struck almost $66 billion of acquisitions, including of the U.K.’s Autonomy Corp. for $10.3 billion in 2011. Just one year after that deal closed, Hewlett-Packard said it would write down about 85 percent of the purchase price after discovering accounting improprieties that inflated Autonomy’s finances.

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