On Tuesday morning, Hewlett Packard Enterprise Co. (HPE) announced it would acquire hyperconverged infrastructure company SimpliVity Corp. in a deal worth $650 million. The Palo Alto, Calif.-based tech giant will pay a discounted price for the unicorn startup, valued at $1 billion in its latest funding round back in March of 2015.
The transaction reflects HPE’s larger initiative to enter growth markets in the booming hybrid IT ecosystem after a massive company restructuring focused on trimming down non-core businesses this past year. (See also: HPE Acquires SimpliVity for $650 Million.)
A Tech Giant at Risk
With the acquisition of SimpliVity, HPE will take on Dell Technologies, Nutanix Inc. (NTNX), and Cisco Systems Inc. (CSCO) in the hyperconverged infrastructure market, which HPE foresees growing at a compound annual growth rate (CAGR) of 25% to nearly $6 billion by 2020.
The newly formed Dell EMC, the result of a $67 billion acquisition and tech’s largest acquisition to date, has partnered with Nutanix in order to sell its hardware to Dell customers. Analysts such as RBC’s Matthew Hedberg aren’t concerned with the acquisition threatening Nutanix’s 52% market share, versus HPE’s current 3% share and SimpliVity’s 18% share.
Cisco, however, as a partner of SimpliVity, may face new pressure. "Thus far, Cisco has seen mixed success at best with its own hyperconverged solution, HyperFlex (built on Springpath's software), and its existing SimpliVity partnership will likely be terminated," wrote Oppenheimer analyst Ittai Kidron in a research note. "Cisco is left with limited options to address its portfolio gaps and could turn to Nutanix for a solution (partnership or M&A)."
Pacific Crest analyst Alex Kurtz reflected a similar sentiment, stating that Nutanix is a “prime takeout candidate by Cisco.”
HPE hopes to complete its acquisition of the Westborough, Mass.-based firm in the fiscal 2017 second quarter.