HPE acquires SGI for $275M

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HPE SGI
HPE SGI

Today HPE announced that it would be acquiring SGI for $275M. SGI has been on our┬átakeover radar for some time. It competes in markets with much larger competitors and has the corporate overhead associated with being a public company. At the same time SGI’s revenues were relatively low for a public company. That makes running a business very difficult. It is little surprise that HPE would pick up SGI for the company’s big data analytics and HPC business. SGI does have some interesting IP and the company still has a brand name that is larger than revenues would indicate.

SGI was purchased in 2009 by Rackable Systems who adopted the SGI brand name. HPE adds a well known yet struggling name to its portfolio. SGI reported just over $500M in revenue so HPE is purchasing the asset at around 1/2 revenue. The company will likely consolidate back-office operations (e.g. Finance) which should provide a still viable business going forward. Further synergies we would expect would be adding the larger HPE portfolio and purchasing power with key suppliers to drive down costs further.

HPE SGI
HPE SGI

We have heard that there will be some product consolidation, which we would expect given HPE’s portfolio. We also understand that HPE was not SGI’s only OEM partner so we do expect the impact of the acquisition to be lower revenue for SGI’s former partners.

You can read the official HPE announcement here.

HPE is clearly taking a stronger focus on hardware as the company divests of its services business and is rumored to be shopping its software business. SGI and HPE had formerly announced an OEM agreement approximately six months before the acquisition. HPE clearly sees opportunity to turn the $500M in revenue into a profitable enterprise going forward.

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