• Hewlett Packard Enterprise (HPE) is reportedly close to a deal to acquire Juniper Networks
• The Wall Street Journal puts the deal value at about $13bn
• AI is at the heart of the move, according to the WSJ

Hewlett Packard Enterprise (HPE) is on the verge of announcing a $13bn deal to acquire Juniper Networks, with HPE’s need for a broader AI portfolio the catalyst for the major M&A move, according to a report published late on Tuesday by The Wall Street Journal. 

According to the WSJ (subscription required), HPE is in advanced talks with Juniper Networks, a long-time developer of AI-enabled networking products. Neither company has commented on the speculation, but the WSJ report caught the attention of the financial markets. Juniper’s share price closed on Monday at $30.22 on the New York Stock Exchange (NYSE), giving it a market value of $9.64bn, but in after-hours trading that price soared by nearly 23.5% to $37.31, much nearer the price that HPE would be offering in order to acquire all of the networking vendor’s stock. 

News of the potential move didn’t sit so well with HPE’s investors though, as its share price ended Monday trading on the NYSE at $17.72 but dipped by 7.8% to $16.34 in after-hours trading.   

Along with every other IT and networking vendor in the world, HPE is keen to be at the forefront of AI developments as enterprises gear up to invest heavily in AI-enabled functionality and processes to improve productivity, become more efficient and explore new business opportunities. 

According to research firm Gartner, worldwide IT spending is projected to total $5.1tn in 2024, an increase of 8% from 2023, with investments in AI supporting overall IT spending growth. IDC, meanwhile, expects the world’s 2,000 largest enterprises (the Global 2000) to allocate more than 40% of their core IT spend to AI-related initiatives by 2025 and for worldwide spending on AI solutions to grow to more than $500bn in 2027. In addition, banking giant UBS expects spending on AI applications and models, including those for generative AI (GenAI), to grow from $2.2bn in 2022 to $225bn in 2027. 

HPE already has a multi-faceted AI strategy, revolving not only around integrated AI capabilities in its products but also a move, announced during last year’s HPE Discover event in Las Vegas, into the generative AI (GenAI) cloud market through the expansion of its HPE GreenLake portfolio to offer on-demand access to large language models (LLMs) for any size of enterprise via a multi-tenant supercomputing cloud service. 

And, like its peers, it has been putting AI at the forefront of many of its public announcements. In its fiscal fourth quarter and full year earnings announcement issued in late November 2023, HPE’s president and CEO, Antonio Neri, noted: "In fiscal year 2023, HPE clearly demonstrated that our strategic investments and extraordinary innovation across the growth areas of edge, hybrid cloud, and AI are resonating with customers… As we continue to capitalise on growing market opportunities – particularly as customer interest in AI continues to explode – I am confident in our ability to deliver substantial returns to our shareholders, hence why we are raising the dividend in FY 2024.”

Jeremy Cox, who was HPE’s interim CFO at the time, noted: “The progress we’re making aligned to our edge-to-cloud strategy is evident in our top- and bottom-line results… We see promising indicators of continued demand in the areas of the market we are prioritising, especially in AI.”  

Juniper Networks could help accelerate HPE’s progress in AI: It 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, with the vendor’s focus on RAN intelligent controller (RIC) capabilities an example of how it believes AI can play a role in automated network management in the future. 

The main AI-enabled gains for Juniper Networks have been in the enterprise sector, which has been a growing part of its business – in its most recent financial quarter, which ended 30 September 2023, the vendor generated more than half of its total $1.4bn in revenues from enterprise customers, the first time that has happened since the company was founded in 1996.  

Now the IT and networking sector, especially HPE’s and Juniper Networks’ customers, partners and rivals, will wait to see if, as has been suggested, a takeover offer is announced as soon as this week.

- Ray Le Maistre, Editorial Director, TelecomTV