HPE announced its intention to acquire Juniper Networks for $14 billion on January 9. My firm’s Chief Analyst Patrick Moorhead and I had the opportunity to speak with HPE CEO Antonio Neri and Juniper Networks CEO Rami Rahim to gain further insights into the potential mega-merger. Considering how important both companies are in one sector—networking equipment—this deal reminds me of HP’s historic $24 billion purchase of Compaq in 2002, which rocked the established order of the PC industry. I know first-hand the potential impact of today’s announcement, given that I worked in a Compaq consumer desktop product marketing role at the time of that historic event over twenty years ago.
A Bigger, Stronger Player in Networking—That Will Need Rationalization
When speculation about the HPE acquisition of Juniper leaked to the press on January 8, my initial thoughts were that HPE is likely seeking a strong AI anchor for its portfolio of hardware, software, and GreenLake IT consumption services. AI is hot, ignited by the attention being directed toward generative AI, the underlying large language models, and many promising use cases. One could argue that beyond the AIOps capability found in the HPE Aruba Networking portfolio today, HPE needs further AI depth to remain competitive and continue to grow its top line revenue and profitability. Juniper could deliver on that front.
Juniper’s acquisition of Mist Systems in 2019 was a smart move, given that Juniper had hits and misses before that with other enterprise networking acquisitions, including Trapeze Networks and Contrail Systems. Mist’s value proposition is firmly rooted in AI, with its Marvis virtual network assistant serving as the tip of the spear for Juniper’s reinvigorated efforts within the enterprise for WLAN, LAN, WAN, and SD-WAN solutions. By all measures, the Mist acquisition has been a success, with Juniper growing its enterprise install base at a faster rate than its service provider business over the last 12 to 18 months.
Beyond giving HPE more depth in AI, Juniper also brings strengths in communication service provider infrastructure. Juniper’s RAN Intelligent Controller (RIC) platform and mobile network operator install base could be a boon to HPE’s telecommunications business unit, complementing HPE’s recent acquisition of Athonet to also provide private cellular networking services for enterprises. It’s also worth noting that one of HPE’s competitors, Dell Technologies, has matured its telecom offerings. Acquiring Juniper could serve as a defensive strategy to allow HPE to take more telecom share and thwart Dell’s efforts—which, until recently, was only selling common off the shelf (COTS) servers to mobile network operators. Dell’s offering has matured, now including RAN accelerator cards and telco-certified servers, as well as an ecosystem of partners aimed at helping mobile network operators adopt open standard technology (including Dell gear) to improve agility and lower capital and operational costs.
With all that said, there is a significant overlap between the HPE Aruba Networking and Juniper networking portfolios. Serious roadmap rationalization will need to occur, and without a doubt, some solutions will be sunsetted. There will also likely be a reduction in force as enterprise and service provider networking product teams and internal channel sales and marketing personnel are blended.
Neri’s take on Juniper
Neri is bullish on a Juniper acquisition despite the redundant networking portfolios. He and Rahim highlight several considerations that point to a strong combination of both organizations:
- Higher expected shareholder value post-close in the first year, given cash flow and other considerations
- $450 million in potential synergies over a three-year period
- A massive engineering team to better compete in the market by driving innovation and shortening time-to-market
- A larger go-to-market sales force
- The creation of a complete networking stack that spans silicon, software, infrastructure, and security, leveraging Juniper’s modern, webscale architecture and datacenter footprint
If approved by regulators, the ultimate success of the acquisition will be measured by how quickly and skillfully HPE integrates Juniper. There are many moving parts to this transaction—deep product roadmap rationalization, talent retention, and channel partner program reconstitution among them. However, if HPE is successful, it could significantly improve its share of the enterprise networking addressable market and strengthen its communication service provider business competitiveness at the same time.