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Hewlett Packard (HPE) Completes Cloud Firm Zerto's Buyout

The acquisition of Zerto is expected to boost Hewlett Packard Enterprise's (HPE) GreenLake capabilities and will help the company in tapping the rapid...

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Hewlett Packard Enterprise HPE revealed that it has completed the previously-announced acquisition of Zerto, a market-leading cloud data management and protection provider. The buyout is expected to enhance the company’s GreenLake edge-to-cloud platform capabilities. Hewlett Packard paid $374 million and funded the buyout through available cash on its balance sheet.

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Rationale Behind Zerto Buyout

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

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

Hewlett Packard also 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.

The acquisition will help Hewlett Packard in tapping the rapidly 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 market is likely to grow from $7.7 billion in 2020 to $15.3 billion in 2024, representing a CAGR of 19%.

Additionally, the company 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. Also, the buyout is anticipated to be accretive to non-GAAP operating profit and earnings from fiscal 2023.

Acquisition to Enhance HPE’s GreenLake Capabilities

Hewlett Packard’s shares have surged 29.5% year to date compared with the Zacks Computer - Integrated Systems industry’s increase of 14.5%.

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Hewlett Packard intends to integrate Zerto under 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.

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 better administration of applications and data.

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

The company has been focusing on restructuring and realigning its businesses to drive long-term sustainable growth, ever since its split from its 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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