HPE aims to create networking giant with $14 billion Juniper buy

The enterprise services company will pay $40 per share for Juniper Networks in an all-cash deal, which represents an equity value of around $14 billion, or slightly higher than rumours earlier in the week suggested.

That's not hugely higher than Juniper's current trading price of around $37, but a fair premium on the $30 level it has been hovering around for the past month or so. HPE's share price has yet to recover from the nosedive it took when the takeover rumour emerged, incidentally.

As the reports from earlier in the week suggested, artificial intelligence is one of the main drivers of the deal. HPE noted that the tie-up will enable it to "accelerate AI-driven innovation," and highlighted "the explosion of AI and hybrid cloud-driven business" boosting demand from enterprise customers. AI specifically will continue to be the most disruptive workload for companies, and HPE is aligning its portfolio accordingly, it said.

But it's about more than just AI. Essentially, HPE is looking to build up its networking business and Juniper Networks is the company to help it do that.

"The combination of HPE and Juniper advances HPE's portfolio mix shift toward higher-growth solutions and strengthens its high-margin networking business, accelerating HPE's sustainable profitable growth strategy," it said. On a pro forma basis HPE's new networking segment would contribute around 31% of total HPE revenue as of fiscal 2023, up from 18%, and contribute more than 56% of operating income.

Juniper will essentially be subsumed into that business. On completion of the deal, Juniper Networks chief executive Rami Rahim will take over leadership of the merged networking business, reporting to HPE CEO Antonio Neri.

Fattening up that networking business also serves another purpose: boosting HPE's ability to compete. The company makes that clear in its announcement and, while it does not name names, it's pretty obvious who it intends to take on.

"The acquisition is expected to double HPE's networking business, creating a new networking leader with a comprehensive portfolio that presents customers and partners with a compelling new choice to drive business value," the company said.

Meanwhile, Neri added a – markedly similar – comment of his own.

"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," he said.

Executives at Cisco are probably not shaking in their boots just yet. The HPE/Juniper deal is slated to close at the back end of this year or early in 2025, subject to regulatory approvals, the green light from Juniper shareholders, and the satisfaction of various other conditions. And then there will be the inevitable integration issues to iron out.

But the networking giant will certainly have something to think about when the merged HPE/Juniper networking business hits its stride.