We are a bit behind on news this week, but this week we had the HPE – Juniper deal announced. The up to $14B acquisition is certainly a big one in the industry. There are some interesting storylines behind the acquisition that should make folks raise an eyebrow or two.
HPE Announced its Intent to Acquire Juniper
HP, and now HPE, has a networking business that started in a somewhat strange way. Decades ago, HP and Cisco had a big reseller business where HP servers and Cisco networking gear were sold together. To be clear, this was a huge partnership that sold a ton of gear in the 1990s.
Back then, servers were not a business where the high-volume players were making 3-6% margin. HP then started its networking business which quickly tanked its partnership with Cisco. If you have heard of Cisco UCS, be clear that the line was Cisco going after HP’s server business after HP went after its space.
In the meantime, HP bought 3Com in 2009 after it was past its prime. It bought Aruba in 2015. Juniper is different. Juniper has a portfolio that goes well beyond HP(E)’s traditional networking business and into new segments.
There were two big storylines. First, around antitrust review. Second around AI. Neither at first glance make a ton of sense. Antitrust is unlikely to be an issue since there are a lot of players in the space. Cisco is still huge. Some large customers are doing their own networking at scale. The HPE-Juniper combination will be a big player, but it is unlikely to be a dominant force across many markets.
Juniper has largely stalled in recent years. For example, in 2016 it finished the year with $4.99B in revenue. That figure had only grown by just over 6% by the end of 2022 even as companies like Arista saw revenues explode and inflation outpaced revenue growth. Juniper not being able to extract huge premiums over the past few years is a good sign that it is not a gateway to a monopoly. Being part of HPE will not change that.
The other story is that HPE will become big in AI because of the Juniper acquisition. That feels a bit more like pulling a buzzword into an acquisition.
Overall, this is a big deal in the industry that is part of almost a quarter century of HP’s networking aspirations. Juniper has some good technology and this is an interesting acquisition. For Juniper, it is a good time for the company to exit and HP/ HPE has a history of buying companies in this lifecycle stage. For Juniper investors and employees, the deal offers a decent premium over the range the company has traded at over the past few years.