Hewlett Packard CEO Meg Whitman Is on the Prowl For Transformative Deals, Here’s Who’s Could Be Next. Nutanix, Arista, Red Hat, Pure Storage?
#HewlettPackardEnterprise ( #HPE ) CEO Meg Whitman extols the virtues of minimalism. “I’m probably the only CEO who actually likes running something smaller than something bigger,” she said at HPE’s Discover conference in Las Vegas late Tuesday. While HPE is slimming down by spinning off its enterprise services business and a software unit, it will also shop for new businesses. The divestitures pay HPE cash dividends of $3 billion and $2.5 billion in cash, respectively, giving it resources for more deals. “I like that dry powder, either to make the right acquisitions or to return cash to shareholders,” Whitman said of HPE’s strengthened cash balance. She told Bloomberg that acquisitions will be “a bigger part of our strategy,” in an interview at the conference.
With the cash they have now, spinning out software and services, they are doing exactly what they said they would do, which is pick up some reasonably sized companies,” said Patrick Moorhead of Moor Insights and Strategy, regarding HPE’s recent purchases of companies such as SimpliVity Corp. and Nimble Storage Inc.
HPE says it is looking for complementary technology that can plug into its distribution system and dovetail with its own offerings.
Storage technology company Nutanix Inc. (NTNX) would be a good match for HPE, Moorhead suggested, if its price had not run up recently. The stock, which closed at $18.60 on Wednesday, has gained 28% from its low in early May. Despite the recent run-up, shares are currently less than half its 52-week high of $46.78.
“Nutanix is too expensive,” he said of the company, which has a $2.65 billion market cap. “If the price of Nutanix goes down, I could see a pretty good marriage there.” Nutanix representatives could not immediately be reached on Wednesday.
Flash storage company Pure Storage Inc. (PSTG) , with a $2.7 billion equity valuation, would be a digestible target and would fit in with HPE’s recent efforts in storage, Moorhead added. Pure Storage declined to comment, but CEO Scott Dietzen recently told trade publication StorageNewsletter.com that the company intends to stay independent.
Red Hat Inc. (RHT) is a good strategic fit that has too high of a price tag, Moorhead suggested. The company develops Linux cloud computing and storage software, among other products, and has $16.4 billion market cap.
Arista Networks Inc. (ANET) , with a $11.2 billion market cap, would be a “great strategic fit,” Moorhead said. The company’s high-frequency trading architecture is popular among finance companies, he added. “Arista makes a great pairing, they are just so expensive now,” he said. “It would be another one of those ‘OK here we go HP is going to blow all of their cash or dilute the stock’ transactions.”