HPE Pivots on SD-WAN, Buys Silver Peak

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By: Mary Jander

Hewlett-Packard Enterprise (NYSE: HPE) has announced it will pay $925 million to add Silver Peak, the software-defined wide-area networking (SD-WAN) player, to its Aruba division. The deal is expected to close by the end of HPE’s fourth quarter (October 2020).

The move enhances HPE's long-term "global edge to cloud platform-as-a-service” strategy. But it is a pivot from HPE’s plan, stated earlier this year, to develop its own SD-WAN solutions for Aruba’s edge-to-cloud capabilities. That was a tall order to begin with, and it must have seemed too ambitious once the enterprise market started clamoring for more and better remote and branch office connectivity in the wake of COVID-19.

The choice seems wise on HPE's part. Silver Peak has become an SD-WAN market leader, boasting 1,500 customers. And SD-WAN is essential to HPE's goals.

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As reported in Futuriom's fourth annual SD-WAN Infrastructure Growth report, by abstracting complex configuration functions in the cloud, SD-WAN streamlines the addition of edge connections to the cloud -- or to multiple clouds. Futuriom identified Silver Peak as one of the top five remaining independent SD-WAN companies likely to be acquired or go to IPO.

On the security front, SD-WAN platforms are becoming important tools for orchestrating and managing both endpoint and cloud security products -- a trend that will grow in importance. When Futuriom asked SD-WAN survey respondents about the primary benefits of SD-WAN, "Improved security tools and orchestration" was on top of the list for 64% of respondents (multiple responses were allowed).

Adding Silver Peak to Aruba Should Go Smoothly

Integrating Silver Peak into the HPE Aruba lineup may not be an enormous issue. Earlier this year, Aruba enhanced its SD-Branch gateways with integration features for cloud-based SD-WANs. Moving more SD-WAN interfaces into the mix shouldn't be too difficult.

The connection between Aruba gateways and Silver Peak SD-WAN should also enhance HPE’s ability to address one of its focal points -- enterprise mobility. After all, back in 2015, HPE bought Aruba for $3 billion in part to acquire its wireless technology. And back in January, Aruba also embedded cellular connectivity and enhanced “zero trust” security in its gateways -- important selling points for service providers and telcos.

Integrating SD-WAN technology, which manages connections to enterprise hubs and branches, with public cloud gateways will be a powerful concept for HPE (and other vendors) going forward. To this end, Silver Peak recently announced one-click automation to public cloud workloads that are hosted in Microsoft Azure infrastructure-as-a-service (IaaS) instances.

No Guarantees

HPE believes its Aruba acquisition will be neutral to its earnings per share by its fiscal year 2022, which is set to start in November 2021. There’s reason to hope that will be the case. The market is ready: Futuriom expects the SD-WAN tools and software market to accelerate to a growth rate of 34% CAGR to reach $2.0 billion in 2020, $2.85 billion in 2021, and $4.6 billion by 2023.

Of course, the unpredictable macroecnomic environment could emit unpleasant surprises or obstacles. Also, there is a chance of increased competition from the merger of other late-stage startups with formidable HPE rivals. Aryaka, Cato Networks, FatPipe, and Versa Networks are all strong candidates for M&A or IPO, according to our research. Recall that Futuriom included CloudGenix on its list of likely-to-be-acquired last year, and Palo Alto Networks (NYSE: PANW) made that prediction come true with about $420 million.