HP (HPQ) Back on M&A Prowl after Autonomy Fiasco - Raymond James; Top 10 Targets (PANW) (FTNT) (FEYE) (ANET)

Raymond James analyst Brian Alexander issued one of today's most talked about research reports after highlighting potential takeover targets for HP (NYSE: HPQ).

Alexander said HP's balance sheet is in the best condition in years, and as a result, HP management has indicated its readiness and willingness to make acquisitions following a three-year hiatus following the Autonomy fiasco.

Management has highlighted that any deal will be small to mid-sized, which they suspect means $5 billion or less in purchase price. The company will most certainly target companies that fit within its broadly defined strategic pillars of cloud, security, big data, and mobility.

The companies Alexander view to be the most likely to be acquired include Hortonworks, Sumo Logic, Palo Alto Networks (NYSE: PANW), Fortinet (NASDQ: FTNT), FireEye (NASDAQ: FEYE), Arista Networks (NYSE: ANET), Adara Networks, Cumulus Networks, SimpliVity, and Actifio.

The analyst offered transaction motivations for each, although below we highlighted just the publicly traded companies mentioned:

Palo Alto Networks (NYSE: PANW):

• HP Motivation: Aggressive move into network security; PANW is security mindshare leader, some overlap with 3Com Firewall and IPS
• Target Motivation: Could add marketing and distribution muscle versus Cisco, but risk of losing innovation; management would likely not sell

Fortinet (NASDQ: FTNT):

• HP Motivation: Fast growing, broad security vendor with burgeoning enterprise business, some overlap with 3Com Firewall and IPS
• Target Motivation: Would add marketing/distribution muscle versus CSCO, CEO Ken Xie has sold multiple companies before and therefore seems like a more likely seller

FireEye (NASDAQ: FEYE)

• HP Motivation: Very strong product in new, hot security category; incident response fits with HP Services group, but still does not give them a key presence in firewall
• Target Motivation: Could be challenges in building a broad security platform, therefore could be a good exit strategy

Arista Networks (NYSE: ANET)

HP Motivation: Complements HP’s networking and SDN efforts; strong growth co.
Target Motivation: Recent IPO, unlikely to sell

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