Hewlett Packard Enterprise buying Silicon Graphics for $275 million

Hewlett Packard Enterprise Co Buys Silicon Graphics International Corp for $275 Million

The acquisition of SGI, which was originally known as Silicon Graphics, will significantly expand HP Enterprise's (HPE) data analytics business and will make the company a bigger player in the high-performance computing (HPC) market.

Hewlett-Packard Enterprise split from HP past year as part of a major restructure instigated by CEO Meg Whitman.

The transaction has been valued at approximately $275 million, and HPE has agreed to pay $7.75 per share in a mix of cash and debt. SGI has roughly 1,100 employees, and its revenues of $533 million in fiscal 2016.

HPE said the deal provides it with a "highly complementary" product portfolio, expanding its presence in key high-performance computing verticals including research, life sciences and government.

Hewlett Packard Enterprise has written a cheque for SGI, a company that makes servers, storage, and software for high-performance computing. It was then picked up by Rackable Systems, who chose to retain the SGI branding.

HPE faces challenges of its own since the split from HP's printer and PC group.

Hewlett Packard Enterprise Company (Hewlett Packard Enterprise) is engaged in offering information technology (IT) and enterprise services solutions.

This deal isn't the first time SGI and HPE have joined forces: SGI's NUMAlink interconnect is part of HPE's Integrity servers. Just how the SGI sale will affect these arrangements remains to be seen, but it's hard to imagine Dell as a reseller for HPE.

We rate SILICON GRAPHICS INTL CORP as a Sell with a ratings score of D. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more hard for investors to achieve positive results compared to most of the stocks we cover. In HPC, it boasts "very strong customer relationships that span decades".

He continued: "Organizations large and small are adopting HPC and big data analytics to derive deeper, more contextual insights about their business, customers and prospects, and compete in the age of big data". "HPE will need to invest and integrate to make it additive".

HPE expects the deal to be neutral to earnings in the first full year after it closes, which is expected to happen in HPE's first fiscal 2017 quarter that ends next March.

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