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Hewlett Packard's (HPE) Zerto Buyout to Boost GreenLake Offerings

In an effort to enhance its GreenLake cloud data services, Hewlett Packard Enterprise HPE last week announced entering into a definitive agreement to acquire Zerto, a market-leading cloud data management and protection provider.

Hewlett Packard will pay $374 million in cash to acquire the company. It intends to fund the buyout through available cash on its balance sheet. The transaction is anticipated to close during the company’s fourth-quarter fiscal 2021.

About Zerto

Founded in 2009, Zerto is an industry leader in the data replication and protection and high-growth disaster recovery as a service (DRaaS) market. The company provides data protection technology, including backup, data mobility and disaster recovery. Its offerings can be deployed on-premise, hybrid and multi-cloud environments.

The company’s software and tools help organizations recover in minutes from cyberattack, ransomware, and other unplanned disruptions, according to Hewlett Packard. Its software brings data back to the original state just a second before the attack or disruption.

Hewlett Packard noted that Zerto easily replicates and migrates data between VMware’s VMW vSphere and Microsoft’s MSFT Hyper-V environments and natively to Amazon’s AMZN Amazon Web Services and Microsoft Azure.

Zerto Buyout to Boost HPE’s GreenLake Capabilities

Hewlett Packard’s shares have surged 24.1% year-to-date compared with the Zacks Computer - Integrated Systems industry’s increase of 11%.

Image Source: Zacks Investment Research

Hewlett Packard intends to integrate Zertounder into its Storage business segment. The integration will expand Hewlett Packard’s GreenLake brand’s cloud data offerings. With Zerto’s cloud data management and protection software, GreenLake customers will be able to protect their data and rapidly act on insights, from edge to cloud.

The acquisition is anticipated to help Hewlett Packard tap the growing market for cloud-based data protection services. Citing a research report from International Data Corporation, Hewlett Packard stated that the data protection as a service (aaS) market is likely to grow from $7.7 billion in 2020 to $15.3 billion in 2024, representing a CAGR of 19%.

Additionally, Hewlett Packard estimates the acquisition to contribute more than $130 million in run-rate revenues at software gross margins. It also projects that about one-third of revenues would contribute to the company’s as-a-service (aaS) Annualized Revenue Run-Rate.

GreenLake — A Key Growth Driver

Managing numerous applications after shifting those to the public cloud is a big challenge faced by organizations. Besides, data management, security and high costs make it all the more challenging for enterprises to manage their applications in the cloud.

GreenLake cloud services offer customers better visibility into resource utilization across co-located and public cloud-based workloads. The services also ensure administration of applications and data.

Notably, last July, Hewlett Packard launched HPE GreenLake cloud services to introduce managed cloud experience to European customers.

Markedly, the company has been focusing on restructuring and realigning its businesses to drive long-term sustainable growth, ever since its split from the parent company. The company has been constantly evolving with spin-offs or by acquiring assets to enhance its capabilities in the hybrid IT model.

The company’s strategy to focus more on high-margin businesses is helping it mobilize resources to the fast-growing areas of the cloud, such as software-defined networks and converged and hyper-converged infrastructure.

Hewlett Packard currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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