Sometimes all it takes is a little push. Bloomberg reported yesterday that HP is in talks to buy Aruba Networks for their wireless expertise. The deal is contingent upon some other things, and the article made sure to throw up disclaimers that it could still fall through before next week. But the people that I’ve talked to (who are not authorized to comment and wouldn’t know the official answer anyway) have all said this is a done deal. We’ll likely hear the final official confirmation on Monday afternoon, ahead of Aruba’s big Atmosphere (nee Airheads) conference.
R&D Through M&A
This is a shot in the arm for HP. Their Colubris-based AP lineup has been sorely lacking in current generation wireless technology, let alone next gen potential. The featured 802.11ac APs on their networking site are OEMed directly from Aruba. They’ve been hoping to play the OEM game for a while and see where the chips are going to fall. Buying Aruba gives them second place in the wireless market behind Cisco overnight. It also fixes the most glaring issue with Colubris – R&D. HP hasn’t really been developing their wireless portfolio. Some had even thought it was gone for good. This immediately puts them back in the conversation.
More importantly to HP, this acquisition cuts off many of their competitor’s wireless plans at the knees. Dell, Juniper, Brocade, Alcatel Lucent, and many others OEM from Aruba or have a deep partnership agreement. By wrapping up the entirety of Aruba’s business, HP has dealt a blow to the single-source vendors that are playing in the wireless market. And this is going to lead to some big changes relatively soon.
The Startup Buzz
Dell is perhaps the most impacted by this announcement. A very large portion of their wireless offerings were Aruba. They sold APs, controllers, and even ClearPass through their channels (with the names filed off, of course). Now, they are back to square one. How are they going to handle the most recent deals? What are their support options?
I little thought exercise with my friend Josh Williams (@JSW_EdTech) had a few possibilities:
- Dell forces HP to buyout all the support contracts for Dell/Aruba customers. That makes sense for Dell, but it will turn a lot of customers against them, especially when HP lets those customers know the reasons why.
- Dell agrees to release the developments they’ve done on the platform to HP in return for HP taking the support business. Quiet and clean. Which is why it likely won’t happen.
- Dell pays HP an exorbitant amount of money to take the support contracts. This gives HP the capital to take on all those new support contracts and gives Dell an exit to rebuild. This is probably what HP wants, but could end up sinking the deal.
Dell got burned, plain and simple. They likely could have purchased Aruba months ago and solidified the relationship. Instead, they are now looking for a new partner. However, I don’t think they are going to get burned again. Rather than shopping for a friend, they are going to be shopping for an acquisition. My money has always been on Aerohive. They have an existing relationship. The Aerohive controller-less cloud model fits Dell’s new strategies. And they would be a much cheaper pickup than Aruba. There is precedence for Dell skipping the big name and picking up a smaller company that’s a better fit. It’s a hard pill to swallow, but it gives Dell the chance to move forward with a lasting relationship.
Brocade is a line-of-business partner of Aruba. They’ve only recently gotten involved since Motorola shut down their WLAN business. This is a good sign for them. That means they can exit from their position and not be significantly affected. It does leave them with a quandary of where to go.
The first choice would be to go back to the Motorola relationship, now in the form of Zebra Technologies. Zebra inherited quite a large portion of the WLAN space from Motorola, but they’ve been keeping rather quiet about it. Are they angling to be more of a support organization for existing installs? Or are they waiting for a big splash announcement to get back in the game? Partnering with Brocade would give them that announcement given the elevated profile Brocade has today.
Brocade’s other option would be to go down the SDN road. The plan for a while has been to embrace SDN, OpenFlow, and all things software defined. The natural target for this would be Meru Networks. Meru has been embracing SDN as well as of late. They had a nice event last year showcasing their advances in SDN. Brocade could bolster that SDN knowledge while obtaining a good wireless company that would give them the strength they need to augment their enterprise business.
Permission To Retire
The odd company out is Juniper. I’ve heard that they were involved at first in trying to acquire Aruba, but when you’re betting against HP’s pockets you will lose in the long run. Their other problem is Elliott Management, everyone’s new favorite “activist investor”.
Elliott has made no secret that they see the value in Juniper in the service provider market. As far back as last year, Elliott has been trying to get Juniper to reave off the ancillary businesses, including security, enterprise, and wireless. Juniper has officially ended sales for Trapeze-based products already. Why would Elliott let them buy another wireless company so soon after getting rid of the last one. Even as successful as Aruba is, Elliott would see it as another distraction. And when someone that active is calling the shots, you can’t go against them, lest you end up unemployed.
This is the end for Juniper’s wireless aspirations. That’s not a bad thing, necessarily. This gives them the impetus needed to focus on the service provider market. It also gives them a smaller enterprise switching portfolio to package up and sell off should that pound of flesh be necessary to sate Elliott as well. Time will tell.
Any other companies with Aruba relationships are either dipping their toes in the wireless waters or don’t care enough to worry about the impact it will have. It will be an easy matter for companies like Alcatel-Lucent to go out and find a new OEM partner, likely with someone like Extreme Networks or Ruckus. Those companies are making great technology and will be happy to supply the APs that customers need. Showing off their technology will also give them great in-roads into customers that might not have been on their radar before.
It’s going to be an exciting time in the wireless space. HP’s acquisition is going to start the falling dominoes for other companies to buy into the wireless space as well. When the dust settles, there will be new number twos and number threes in the market. It also clears the middle of the space for up-and-comers to grow. Cisco is going to stay number one for a while, and HP will be number two when this deal closes. But until we see the fallout from who will be purchased and partnered with it’s tough to say who will be a clear winner. But make sure you’ve got your popcorn ready. Because this isn’t over yet. Not by a long shot.
I think they will find it hard to do a new generation of wired and wireless network as one seamless whole. I’m interested to see what the HP-Aruba product line will be 2-3 years down the road. I would not be surprised if they find out they have bitten off more than they can chew, especially the more integration they try to do on the engineering side between the Aruba wireless controllers and their existing switch line. One thing is for sure; Colubris did not work out so well for them…
You are definitely right about the Dell backlash. That seems like that has been a key to Dell’s strategy for the last little bit and that’s gone now. I wonder if being private limited Dell’s ability to shop for ARUN — the Silver Lake guys probably want to see a return on their money — not taking on more debt.
(full disclosure: I work for Cisco)
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