Hewlett Packard Enterprise Co. said today that it will buy flash storage maker Nimble Storage Inc. for about $1 billion in cash, plus about $200 million in unvested equity awards, as it seeks to shore up its flagging storage business in the wake of a dismal first-quarter earnings report.

The deal underscores the struggles storage makers have finding bright spots in a market that is saturated with competitors. The acquisition values Nimble at about $700 million, or $12.50 a share, which is more than 75 percent below the peak value of $52.74 that the company’s stock hit two months after its late-2013 initial public offering. In trading today, Nimble’s share not surprisingly jumped, by 45 percent, to about $12.50.

The deal fills out the middle of HPE’s storage portfolio, which include the 3PAR high-end arrays and MAS low-cost components for smaller businesses. “This deal will enable HPE to deliver a full range of superior flash storage solutions for customers across every segment,” HPE said in a statement.

More broadly, Antonio Neri, executive vice president and general manager of HPE’s Enterprise Group, said in a post that the acquisition will help HPE in an increasingly hybrid information technology environment. “Looking forward, we have a clear product roadmap for our hybrid IT offerings, and our acquisition of Nimble fits squarely in it,” he said.

It also buys HPE an important software asset in InfoSight Predictive Analytics, a product that monitors customers’ infrastructure and uses predictive analytics to prevent breakdowns before they happen. The addition of InfoSight to HPE’s storage portfolio “should also benefit 3PAR and SimpliVity,” the hyper-converged startup that HPE said it will acquire in January, said Stu Miniman, an analyst at Wikibon, owned by the same company as SiliconANGLE. HPE said InfoSight automatically detects 90 percent of all issues within a customer’s infrastructure and resolves over 85 percent of them.

“Nimble is also another relatively new storage product to add to the portfolio,” Miniman said. “On the server side, Nimble has sold into a lot of Cisco UCS (Unified Computing System) environments, so expect HPE to use these solutions to try to gain a deeper hold into accounts and try to weaken Cisco’s position.” In reporting its fiscal fourth-quarter earnings earlier today, Nimble Storage said its customer base now exceeds 10,200 companies and its quarterly revenue grew 30 percent from a year ago.

Some analysts, however, wonder if HPE overpaid. “This take-out price seems a little stretched for an asset that was not turning a profit,” Barclays analyst Mark Moskowitz wrote in a note to clients. “Plus, Nimble had been losing competitive momentum as the storage incumbents caught up on flash- and hybrid-based solutions.”

Still, he added, “in the near- to mid-term, there is the potential of HPE’s global reach and broad channel augmenting the revenue run rates of Nimble and the other acquisitions over time.” HPE’s shares were down a fraction of 1 percent in today’s trading, in line with the overall market.

HPE alarmed investors last month by reporting that storage revenues fell 13 percent in the quarter. Storage had been one of the few bright spots in the company’s portfolio, but growing competition from a newly invigorated Dell EMC as well as cloud storage providers such as Amazon Web Services has left it less room to maneuver. Meanwhile, Cisco Systems Inc. has been making steady progress in the data center server market, further eroding HPE’s position.

The deal leaves Pure Storage Inc. as sole independent maker of flash storage arrays in a market that, not long ago, featured more than a half-dozen prominent startups. Consolidation and bankruptcies have thinned the herd, beginning with SanDisk Corp.’s acquisition of Fusion-io Inc. in late 2014, followed by in rapid order by Seagate Technology PLC’s purchase of  Dot Hill Systems Corp., IBM’s pickup of Cleversafe Inc. and NetApp Inc.’s buyout of SolidFire Inc. Another early player, Violin Memory Inc., filed for bankruptcy in December.

HPE said Nimble Storage will becoming a wholly owned subsidiary upon completion of the deal. Nimble employs 1,300 people.

Photo: HPE