Cloud market is booming, and every company wants to expand their presence. Hewlett Packard Enterprise (HPE) is no exception, as it plans to have a larger footprint in this sector within the next few years. To this end, it has acquired a company called SimpliVity for $650 million in cash.

SimpliVity was founded in 2009, and is based in Westborough, Massachusetts. Over the last eight years of operations, this company has raised $276 million in four rounds of funding, according to Crunchbase. It specializes in the making of hyper-converged infrastructure (HCI) – a $2.4 billion market with a strong growth of more than 25 percent a year. HCI saves companies billions of dollars every year in technology and infrastructure costs, as it combines computing, storage, and networking into a single component. To cash in on this trend, SimpliVity created its own HCI product called OmniCube that runs on many hardware such as Lenovo, Dell, Cisco, HPE, and Huawei.

Its flagship product, OmniCube, provides a simple and scalable architecture to achieve the highest levels of performance while ensuring data protection. Users can start with a single node, and can expand it to a global network of nodes to move and protect data across different physical locations.

With HCI being such a hot market, SimpliVity had big plans for its future. In March 2015, it obtained a funding of $175 million from investors based on its valuation of $1 billion. However, those investors are taking a beating now because HPE is paying only $650 million for the company.

This brings up an important question of why SimpliVity decided on an offer that’s almost 35 percent less than the company’s worth. If you look at the IPO tech market, it’s come to a standstill since 2015. Nutanix, a competitor, took the IPO route, but was not as successful as it was expected to be. Also, experts opine that the tech IPO will not improve any time soon, and is only expected to get worse. Given this scenario, SimpliVity’s directors thought this was a good offer., and decided to take it, even if it meant the last round of investors have to lose $350 million.

As for HPE, this is a sweet deal as it can expand HPE’s existing capabilities. It is also likely to fit into HPE’s strategy of making hybrid IT simple for its customers, as more companies are looking for ways to create a secure and resilient IT infrastructure at affordable prices. With this acquisition, HPE aims to get a larger market share in the hybrid cloud platform –  platforms that run applications partly on clients’ private servers and partly on public cloud servers.

In addition, HPE’s sales is expected to get a big boost from OmniCube’s revenue, thereby making it a double treat for the company. In fact, when SimpiVity’s product and market reach is combined with HPE’s existing product line and marketshare, it can be a deadly combination. The best part is customers get to enjoy these added benefits, and HPE can hope to get more revenue, even if it was a bittersweet end for SimpliVity.

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