HPE confirms $14bn deal to acquire Juniper Networks

• Just a day after the speculation emerged, HPE has announced an agreement to acquire Juniper Networks
• The purchase price, at $14bn, is even higher than originally reported
• The acquisition will “strengthen HPE’s position at the nexus of accelerating macro-AI trends”, according to its CEO
• It will also double the size of HPE’s networking business to 31% of total sales

That didn’t take long… Just a day after speculation first emerged that Hewlett Packard Enterprise (HPE) was on the verge of announcing a takeover bid for Juniper Networks, the companies have announced an acquisition valued at $14bn. 

HPE is to pay $40 in cash for each Juniper Networks share – that’s 32% higher than the closing price on Monday 8 January, the final day of trading before news of the impending deal leaked out in The Wall Street Journal. Juniper’s stock closed on Tuesday at $36.81 on the New York Stock Exchange (NYSE), up by almost 22%, and gained slightly more to hit $37.01 in after-hours trading once the official M&A announcement had been published, but that currently leaves the share price a few dollars short of HPE’s offer.

HPE’s share price, meanwhile, sunk by almost 9% on Tuesday to $16.14 as investors baulked at the Juniper price tag and the debt load that an all-cash deal will bring: Also under consideration is the poor track record in general of major technology acquisitions – there are very few that can be regarded as a great success. 

But the HPE team is convinced that bringing the Juniper product portfolio, team and business on board makes a great deal of sense, though Juniper, which is on course to report full year 2023 revenues of $5.6bn, is much smaller than HPE, which generated sales of $29.1bn in its recently completed full fiscal year.  

As anticipated, AI is at the heart of the deal’s rationale: As we noted in our previous analysis of why it might be attractive to HPE, Juniper Networks has been describing itself as a “leader in secure, AI-driven networks” since its 2019 acquisition of Mist Systems, which had developed AI-enabled, cloud-managed wireless networking technology for enterprise customers. Since then it has been developing a strategy and portfolio to capture the demand for AI-driven automated operations and “self-driving” networks in the enterprise, datacentre and telco sectors.

But while the AI element is important, the networking aspect is equally (if not more) so. Juniper started out as an IP router vendor and that is still a core strength: It is still one of the leading vendors in the service provider and datacentre IP routing platform market, where its products have long been highly regarded for their quality, and one of the leading players in the still growing SD-WAN and SASE (secure access service edge) market, though it should be noted that HPE is already a strong player in this market segment with its Aruba business. 

According to HPE, adding Juniper into the mix will increase HPE’s networking revenues from 18% of the company’s total sales to 31%, while networking product sales would contribute more than 56% of the vendor’s operating profits. “The acquisition is expected to double HPE’s networking business… The explosion of AI and hybrid cloud-driven business is accelerating demand for secure, unified technology solutions that connect, protect, and analyse companies’ data from edge to cloud,” noted HPE in its acquisition announcement. “These trends, and AI specifically, will continue to be the most disruptive workloads for companies, and HPE has been aligning its portfolio to capitalise on these substantial IT trends with networking as a critical connective component,” it added. 

And while there is overlap between its Aruba business and Juniper’s networking portfolio, HPE doesn’t see this as an issue. “Through its suite of cloud-delivered networking solutions, software and services, including the Mist AI and Cloud platform, Juniper helps organisations securely and efficiently access the mission-critical cloud infrastructure that serves as the foundation of digital and AI strategies. The combination with HPE Aruba Networking and purposely designed HPE AI interconnect fabric will bring together enterprise reach, and cloud-native and AI-native management and control, to create a premier industry player that will accelerate innovation to deliver further modernised networking optimised for hybrid cloud and AI,” according to HPE. 

As a result of Juniper’s strength in the networking sector, its CEO Rami Rahim will head up HPE’s expanded networking business once the deal is completed. And that business won’t be about just connecting point A to point B – we’re talking about smart, automated, AI-driven and cloud-supported networking, which is what the telcos, datacentre operators and enterprises want and need these days.

“Networking will become the new core business and architecture foundation for HPE’s Hybrid Cloud and AI solutions delivered through our HPE GreenLake hybrid cloud platform. The combined company will offer secure, end-to-end AI-native solutions that are built on the foundation of cloud, high performance, and experience first, and will also have the ability to collect, analyse, and act on aggregated telemetry across a broader installed base. This will drive even better end-user experiences and streamlined network operations for our customers,” noted HPE.

As you’d expect, HPE’s president and CEO, Antonio Neri, is putting a positive spin on the deal. “HPE’s acquisition of Juniper represents an important inflection point in the industry and will change the dynamics in the networking market and provide customers and partners with a new alternative that meets their toughest demands,” he proclaimed. “This transaction will strengthen HPE’s position at the nexus of accelerating macro-AI trends, expand our total addressable market, and drive further innovation for customers as we help bridge the AI-native and cloud-native worlds, while also generating significant value for shareholders. I am excited to welcome Juniper’s talented employees to our team as we bring together two companies with complementary portfolios and proven track records of driving innovation within the industry,” he added. 

HPE also believes that the acquisition, which it expects to complete either late this year or early in 2025, will create new business opportunities, enhance its opportunities with hyperscalers and telcos, and deliver operating cost synergies of about $450m per year within three years of the deal’s completion.

But as the dive in HPE’s share price has shown, this acquisition doesn’t make sense to everyone. And it certainly doesn’t make much sense to Scott Raynovich, founder and principal analyst at Futuriom, who has been tracking and reporting on developments at Juniper Networks since the company was founded in 1996. “The numbers are challenging… there are challenges in overlap with HPE’s Aruba networking division” and the deal could “just fail”, noted the analyst in this appraisal of the HPE/Juniper combination.   

- Ray Le Maistre, Editorial Director, TelecomTV