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Report: HP $6B-$10B Deal Appears Imminent

HP is close to sealing a deal on an acquisition, according to a research report from Sanford Bernstein that came on the heels of a meeting HP CEO Meg Whitman had with analysts in New York Wednesday.

A Hewlett-Packard acquisition in the range of $6 billion to $10 billion is "imminent," according to a Re/code report based off a research note from Sanford Bernstein analyst Toni Sacconaghi.

The Re/code report and analyst note followed HP CEO Meg Whitman's meeting Wednesday with analysts in New York on the company's planned split into two publicly traded Fortune 50 companies, each with $56 billion in sales. The companies would be named HP Inc., which would include printers and PCs, and Hewlett-Packard Enterprise, which would include enterprise systems, software and services.

HP, Palo Alto, Calif., declined comment.

[Related: CRN Exclusive: Whitman Says HP Split Frees Up Enterprise Company To Eye Acquisitions]

"With the split of the two companies, it leaves them open to make a big acquisition," said Bob Venero, CEO of Holbrook, N.Y.-based solution provider Future Tech, No. 234 on the CRN Solution Provider 500 list. "I am sure there is a plan in place to do something."

Venero said he is looking forward to gaining more insight into HP's future at next week's Best of Breed (BoB) Conference in Orlando, Fla., presented by CRN parent The Channel Company, during which Whitman and Dell founder and CEO Michael Dell will be holding fireside chats with The Channel Company CEO Robert Faletra.

Re/code reported Sacconaghi said HP could exit the current quarter with net cash of about $7 billion and add another $2 billion in fiscal 2015.

HP informed Wall Street analysts Monday it is still dealing with material nonpublic information, in a disclosure some took to signal the company is in acquisition talks.

Whitman told CRN Monday the company's split opens the door for the company's new Hewlett-Packard Enterprise business to "be better able and more quickly make acquisitions that further the new style of IT."

Hewlett-Packard Enterprise will have "a balance sheet that will be tilted toward more in-organic moves, more M&A," Whitman told CRN.

NEXT: Solution Providers Expect An HP Enterprise Deal

Some solution providers said they see the split positioning Hewlett-Packard Enterprise for potential acquisitions in emerging technology markets such as hyper-converged infrastructure and object storage, which is seen as key to large-scale cloud deployments.

HP has existing technology partnerships with Cleversafe and Scality, two highly regarded object storage vendors, and uses their technology with HP ProLiant servers.

CRN reported in June that HP was in talks to buy fast-growing hyper-converged infrastructure provider SimpliVity. SimpliVity CEO Doron Kempel at the time denied the company was in "dialogue with anyone regarding" an acquisition.

"HP is obviously freeing themselves up to make a big, bold statement and possibly an acquisition," said Jamie Shepard, regional and health systems senior vice president at Dallas-based national solution provider Lumenate, No. 122 on the CRN SP500. "They need to make an acquisition in the hyper-converged software-defined data center area to stay relevant."

HP is playing catch-up in the hyper-converged infrastructure market where rivals such as Cisco Systems and EMC are moving quickly and SimpliVity and Nutanix have emerged as fast-growing companies, Shepard said.

"This frees things up so HP can get more involved with hyper-converged infrastructure and software-defined," Shepard said. "This is where HP is lacking. They don't have a strategy there for hyper-converged."

The news that HP is splitting up has fueled more speculation on whether a deal could be on the table between HP and EMC. The possibility of an HP-EMC deal is definitely still on the table, wrote Joseph Wittine, a senior equity analyst at financial analyst firm Longbow Research, in a research report Monday.

"We believe an EMC valuation of $33-$34 (presumably paid all/most in HP stock) would get the deal done, with activist shareholders receiving 'close enough' to their $37 target price when accounting for assumed cost synergies a combination would bring and some incremental multiple expansion," Wittine wrote.


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