Hewlett Packard Enterprise (HPE) and Juniper Network Inc., have announced that the companies have entered a definitive agreement under which HPE will acquire Juniper. While HPE is a global edge-to-cloud company, Juniper has built a reputation in Artificial Intelligence (AI) native networks.
Does this deal signal that other global players are now contemplating going higher, further, faster when it comes to building an AI-heavy arsenal?
Has AI sparked a return to Billion-dollar Tech Deals?
According to MarketsAndMarkets.com, “The global AI market size was valued at US$ 150.2 Billion in 2023, and is expected to grow at a CAGR (Compounded Average Growth Rate) of 368 per cent from 2023 to 2030. The revenue forecast for 2030 is projected to reach US$ 1,345.2 Billion.”
The party began in 2023 with Microsoft-Open AI deal probably being the biggest (though it could now draw scrutiny from regulators in the European Union). While Amazon Web Services (AWS) announced a US$ 4 Billion investment in Anthropic, Google made a US$ 2 Billion commitment. Meanwhile Inflection AI bewitched industry heavyweights like Microsoft, Bill Gates and Nvidia among others raising over US$ 1 Billion.
But January 2024’s HPE-Juniper deal size has surpassed last year’s figures. It is an all-cash transaction for US$ 40.00 per share, representing an equity value of approximately US$ 14 Billion. Industry watchers have been going into a tizzy over the acquisition ever since The Wall Street Journal broke the story even before the official announcement was made, and this even caused a huge surge in Juniper’s stock prices; its best performance since Jan 2004!
In fact, given that before the story broke, Juniper’s market cap was hovering around US$ 10 Billion, the acquisition was at a premium.
Why does HPE want Juniper?
An official statement from Juniper, perhaps sheds better light on HPE’s motivations. It says, “The explosion of AI and hybrid cloud-driven business is accelerating demand for secure, unified technology solutions that connect, protect, and analyze companies’ data from edge to cloud. These trends, and AI specifically, will continue to be the most disruptive workloads for companies, and HPE has been aligning its portfolio to capitalize on these substantial IT trends with networking as a critical connective component.”
It further explains exactly how this will work, saying, “Through its suite of cloud-delivered networking solutions, software, and services including the Mist AI and Cloud platform, Juniper helps organizations 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 modernized networking optimized for hybrid cloud and AI.”
The company said that upon completion of the transaction, Juniper CEO Rami Rahim will lead the combined HPE networking business, reporting to HPE President and CEO Antonio Neri.
“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,” said Neri.
“Our multi-year focus on innovative secure AI-native solutions has driven Juniper Networks’ outstanding performance,” said Rami Rahim, CEO of Juniper Networks.
HPE feels that the numbers are also looking good enough to elevate its standing among its peers. “On a pro forma basis, the new networking segment will increase from approximately 18% of total HPE revenue as of fiscal year 2023 to approximately 31% and contribute more than 56%1, of HPE’s total operating income,” said the statement released by Juniper and HPE, adding, “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, analyze, 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.”
The transaction is currently expected to close in late calendar year 2024 or early calendar year 2025, subject to receipt of regulatory approvals, approval of the transaction by Juniper shareholders, and satisfaction of other customary closing conditions.