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August 12, 2016

Wheelings and Dealings: Hewlett Packard Enterprise Finalizing Deal to Acquire SGI

Toward the end of 2015, Hewlett Packard split into two companies; it created HP and HP Enterprise (HPE), which would take control of server manufacturing, networking and software, leaving consumer PCs and printing to the former entity.

Venture Beat’s analysis of last year’s split sarcastically called the endeavor “Sizzling!” because of HP’s long downward slope in the ranks of the computing elite. Its stock, according to that late-year report, has dropped about 20 percent since 1999. Unfortunately for anyone still invested in the giant, it is still scrambling to make something solid out of its remains, and so its new copy, HPE.

HPE announced this month that it offered $275 million to acquire SGI, known as Silicon Graphics, a company that has been around for decades but has also seen its share of disappointment when it comes to revenue generation. Recent follow up from Venture Beat shows that SGI filed for Chapter 11 bankruptcy in 2009 and was then acquired by Rackable Systems (News - Alert), which kept the SGI branding.

Now it is HPE’s turn to try to breathe some life into SGI. This crumbling-leading-the-crumbling scenario is expected to make good on the promise of each side to use their expertise to complement one another. Antonio Neri, the HPE executive vice president and general manager, spoke to that point:

“At HPE, we are focused on empowering data-driven organizations,” Neri said. “SGI’s innovative technologies and services, including its best-in-class big data analytics and high performance computing solutions, complement HPE’s proven data center solutions designed to create business insight and accelerate time to value for customers.”

Jorge Titinger, the CEO and president of SGI, also commented on the deal. He noted that his company’s high-performance computing products will help HPE offer one of the most comprehensive portfolios in the world. HPE will have the global presence to make sure SGI’s software and services find customers in a wide range of geographical regions and computing markets.

The deal is expected to break even regarding cost of the acquisition and the revenue it will bring to HPE in the first year. Following the pair’s 2017 activity, HPE should find net growth. HPE’s offer of $275 million is nearly finalized; it should complete regulatory conditions by the end of the first quarter of its 2017 fiscal year.

Edited by Alicia Young

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