Hewlett Packard Enterprise is buying a long-time rival with a declining business (HPE, SGI)

Datetime:2016-08-23 05:27:25          Topic: HPC           Share

HPE CEO Meg Whitman HPE

Hewlett Packard Enterprise announced plans to buy an iconic maker of high-end computers, Silicon Graphics, for $7.75 per share, or $275 million net of cash and debt.

This was basically bargain shopping to take out a long-time competitor.

SGI brought in $521 million in revenues in its last fiscal year, and lost nearly $39 million (net income). SGI's revenues had been diving in recent years, down from $767 million in 2013, and the stock reflected investors' displeasure. Share prices had been struggling to stay above $5.

Taking on a company with shrinking revenues is an interesting choice. HPE CEO's Meg Whitman's nearly five-year reign, first as CEO of HP and now of the spin-off company HPE, has been dominated by her attempt to rightsize HP, divest the company of its own shrinking business units, and find some growth markets.

To that end, she split HP into two companies, HP Inc. (printers and PCs) and HPE (servers, software, data center tech). And, in May, she entered an agreement to spin out HPE's consulting unit , Enterprise Services, into a new company half owned by HPE and half by one-time rival CSC.

Clearly she's also ready to start shopping, especially if the price is right.

HPE's press release says buying SGI will increase HPE's presence in the $11 billion high performance computing (HPC) market, growing at 6-8% annually (CAGR), and in the data center market, growing at "over twice that rate."

SGI has about 1,100 employees.





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