In a strategic move that could bring fresh vitality to its operations, information technology company Hewlett Packard Enterprise (NYSE: HPE) Friday announced the acquisition of supercomputer maker Cray for about $1.30 billion.
The deal values Cray’s stock at $35, representing a premium of about 17%, and is tentatively scheduled to close early next year. It is expected to be accretive to HPE’s adjusted earnings after one full year of completion. Meanwhile, the management has left its free cash flow outlook
for fiscal 2020 unchanged at $1.9-$2.1 billion, after factoring in the integration costs associated with the transaction.
Cray’s expertise includes the management of huge data sets, artificial intelligence, and simulation using supercomputing technology. Based in Seattle, the company employs more than 1,000 persons globally.
Cray’s expertise includes management of huge data sets, artificial intelligence, and simulation using supercomputing technology
The buyout marks HPE’s formal entry into the supercomputer business. It is expected to help the company boost its federal business and serve its customers in the education sector better, with additional offerings.
By adding Cray into its fold, the company intends to combine the former’s supercomputing skills with its state-of-the-art technologies to address the highly data-intensive workloads of clients.
Recently, Cray secured a $600-million order from the US Department of Energy for its Frontier supercomputer. Under the contract, the system is required to be delivered to Oak Ridge National Laboratory in 2021.
Antonio Neri, chief executive officer of HPE, said, “Cray is a global technology leader in supercomputing and shares our deep commitment to innovation. By combining our world-class teams and technology, we will have the opportunity to drive the next generation of high-performance computing and play an important part in advancing the way people live and work.
The acquisition, the biggest since the company became public four years ago, is important for it, considering the growing competition from technology majors like International Business Machines (IBM).
Also see: Hewlett Packard Enterprise Company Q1 2019 Earnings Conference Call Transcript
In the most recent fiscal quarter, HPE’s earnings more than doubled to $0.34 per share, aided by broad-based demand growth that lifted revenues by 10% to $7.5 billion. Buoyed by the strong results, the management revised up its outlook for the fiscal year.
HPE shares were up 2% in early trading Friday, after opening the session slightly lower. The stock lost about 16% since last year and 1% in the past six months.
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