HPE and Juniper Networks and a $14B Price Tag: Smart Move or Not So Much?
The News: After a day of speculation, HPE and Juniper Networks’ $14B deal moves forward, a sign that HPE is not fooling around as it focuses on the acceleration and adoption of AI tech and the bottom line value it expects to deliver. I had the opportunity to hop on a video chat with Zeus Kerravala, a fellow analyst and member of our Cube Collective community of independent analysts and thought leaders, to discuss this before the acquisition intent was officially announced. Read more at SiliconANGLE
Watch the video of our conversation here:
HPE and Juniper Networks: Making Beautiful Music Together … Maybe
Analyst ANGLE: Yesterday was a busy day indeed on the networking front, as news of HPE and Juniper Networks’ potential deal made the rounds. $14 billion is a very large number, and it’s clear that HPE intends to maximize its efforts in adopting and accelerating AI tech with this move.
It’s interesting, as it sets the stage for a battle for network supremacy with Cisco, pitting HPE Aruba and Cisco Systems against one another. In reality, Cisco has a significant edge over HPE in the networking arena. Still, this HPE Juniper move could fill some gaps in HPE’s networking portfolio, providing leverage with a bigger data center and service provider footprint against Cisco.
Juniper Mist AI is the crown jewel in this acquisition, offering what many see as the best AI platform for networking. Mist AI uses a combination of AI and machine learning to optimize user experiences, providing network visibility and business intelligence that helps quickly identify the root cause of problems with event correlation, provides proactive notifications, automated workflows, serves up AI-driven insights, and streamlines help-desk processes. For HPE, access to Juniper’s Mist AI networking capabilities opens the door to combining Juniper Mist AI into HPE’s networking-as-a-service portfolio with Aruba, which is no doubt attractive.
The word on the street is mixed. As you’ll see from our discussion, as well as in Zeus’s article published early yesterday on SiliconANGLE, there are many who struggle to find the $14B price tag here worth the price, all things considered. That said, HPE channel partners largely appear to be excited about this deal, no doubt seeing opportunities to leverage AI in their work with customers transforming the IT landscape. Equally relevant, the move positions HPE to more directly take on Cisco, not only from a networking strategy, automation, and security standpoint, but also addressing threat assessment and real-time risk identification — also compelling to HPE channel partners.
HPE and Juniper Networks: The Debt Load, The Integration Challenges, The Overlap
The naysayers — and Zeus and I count ourselves among them at this point — aren’t as bullish on the idea for a variety of reasons. For starters, the price tag is a hefty one and HPE isn’t sitting on a pile of cash to make this happen without taking on a significant debt load. That debt load, at a time when interest rates are significantly higher than in the past handful of years, and the time it takes to work through that, is of concern.
In addition to the management of that debt load, there are overlapping capabilities between the Juniper Mist AI platform and HPE’s Aruba, which brings the topic of integration to bear. What will the integration and synergies be given the differences in the product portfolios — and the similarities. There have already been some challenges in the HPE/Aruba channel programs; adding Juniper to the mix might make that more interesting to work through.
A couple of important points: Juniper has made great inroads in the enterprise market, reporting that business is its biggest business unit and responsible for about 38% of revenue. Juniper expects to double that in the next three years. HPE’s strength is channel and GTM, and their networking portfolio has large channel and services businesses. Add Mist AI to the mix and it arguably brings the best of both worlds to customers.
What’s Ahead for HPE and Juniper
Looking ahead for HPE and Juniper, the acquisition is expected to be complete in late 2024 or early 2025. Barron’s reported that HPE has predicted cost savings of up to $450 million per year within three years post-acquisition. If that turns out to indeed be the case, this will be hailed as a brilliant move. The economics still trouble us, but we’ll watch this play out with interest.
