The story of Aruba Networks, which sold today to HP for $US3 billion cash, is a classic Silicon Valley tale of a huge final exit long after the founding CEO had left the company.
Aruba is an 1,800-employee Sunnyvale, California-based company that makes enterprise WiFi equipment. HP said it will pay $US24.67 per share, a 34% premium to Aruba’s close on Feb. 24, the day before Bloomberg reported that the deal was about to happen and shares of Aruba skyrocketed on speculation.
In classic Valley style, only one of the three original founders is still with the company: Keerti Melkote, who owned barely over 1% of the company.
With the sale to HP, his stake is worth about $US32 million (that stake is as of October, the latest proxy document filed to the SEC).
Melkote will continue to work with Aruba for the immediate future. He is joining HP with the acquisition.
The other two founders didn’t own enough of a stake to be listed in any SEC documents, according to our search.
A chain of CEOs
Aruba was founded by three guys back in 2002 who had worked together at a company called Alteon, bought by Nortel Networks for $US7.3 billion in stock back in 2000, during the heady internet bubble days.
Aruba’s other co-founders were Pankaj Manglik (its founding CEO) and Merwyn Andrade (its founding CTO, who retired after six years with Aruba following its IPO).
Manglik led Aruba for its first two and a half years through its first 80 employees, until the powers that be got nervous about Cisco and decided the company needed an experienced sales and operations person.
Manglik was replaced by Don LeBeau, was was previously running Cisco’s worldwide sales and operations. LeBeau was credited for creating the Cisco sales machine juggernaut. (And in Valley irony, Cisco was a company that famously ousted its cofounders.)
When Aruba was openly hunting for a new CEO, sources said that Selina Lo was being considered. Lo was a former vice president of product management at Alteon. She was consulting for Aruba and an investor. But the company didn’t hire her, and — we’re not kidding — Aruba’s PR person said this about her: “She’s too attractive to be our CEO, and we’d need to pay her a shoe budget,” an industry publication called Light Reading reported at the time.
LeBeau lasted about two years, long enough to talk up how he turned down an acquisition offer from his old employer Cisco. Then Cisco turned around and bought Aruba’s biggest competitor at the time, Airespace, for $US450 million.
Close to a year later, Aruba tapped its then chairman of the board, Dominic Orr, to become CEO and lead the company into an IPO.
Orr was already pretty famous in the networking world. He was a former HP exec who had been CEO of Alteon, taking that company public before its epic sale to Nortel.
He would later talk about those pre-IPO days, saying how being ‘ruthlessly aggressive’ nearly ruined his life, Fortune’s Stephanie Mehta reported in 2007.
This would lead him to “a nine-year struggle during which his marriage would end, he would take a company public and then sell it, plunge into depression, drop out of the workforce, and take another company public, all while searching for a way to be a good boss and a good person,” Mehta reported.
Whether he ever found work-life-balance we can’t say.
We can tell you that in his role as CEO of Aruba, when including stock options and shares owned by his various investment vehicles, he became the largest single-person shareholder. He owned about 4% of the company, according to Aruba’s most recent proxy filed with the SEC in October.
And he’s not stopping work on Aruba anytime soon. He finds himself back at HP. Both Orr and Melkote will join HP after the deal closes reporting to Antonio Neri, leader of HP Enterprise Group, HP said.
Does the move make sense for HP?
As to whether this $US3 billion spend was a good move for HP, there are some naysayers out there.
Aruba was a far second to Cisco in market share of enterprise WiFi equipment, with about an 11% share, compared to Cisco’s nearly 48% share, according to IDC.
But HP already had a full suite of WiFi gear of its own to sell, and about 4% market share.
Forrester analyst Andre Kindness is bearish on the deal, telling Business Insider in an emailed statement, “I think this is bad move for Aruba customers and HP customers since this will be the third wireless solution HP has bought in the last five years (Colubris, 3Com, and now Aruba Networks).”
Kindness also questioned why HP was adding Aruba to HP’s server and storage business unit. His concern is, by doing so, HP’s wireless business will “miss the changes” that are occurring within its industry.
We reached out to HP, Pankaj Manglik, and Keerti Melkote for comment and will update when we hear back.
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