“This is a bold $14 billion bet to take the networking leader crown away from Cisco,” said CR Howdyshell, CEO of Advizex. “It’s a battle of the networking titans as HPE battles Cisco for supremacy in the age of AI networking.”
Hewlett Packard Enterprise is acquiring Juniper Networks in a $14 billion deal that sets off a battle for network supremacy in the AI era between HPE Aruba Networking and market leader Cisco Systems.
HPE said Tuesday that the deal to buy Sunnyvale, Calif.-based Juniper gives it additional AI networking strength and effectively doubles its networking business, creating a “new networking leader with a comprehensive portfolio to showcase to customers and partners.” a compelling new choice to drive business value.”
[Related: HPE’s Potential Acquisition Of Juniper Would Set Up High-Stakes Networking Battle With Cisco: Partners]
HPE will pay $40 per share in an all-cash deal that is expected to be accretive to non-GAAP EPS and free cash flow in the first year following closing.
On a pro forma basis, the new network segment will increase from approximately 18 percent of total HPE revenue to approximately 31 percent beginning in fiscal 2023 and contribute more than 56 percent of HPE's total operating income.
“Wow. This is a bold $14 billion bet to take Cisco's network leadership crown,” said CR Howdyshell, CEO of Advizex, a Fulcrum IT Partners company and a top partner of HPE and Aruba, the has invested heavily in Networking as a Service. “It's a battle of the networking titans, with HPE battling Cisco for supremacy in the age of AI networking.”
Cisco declined to comment on the acquisition.
Howdyshell called HPE's move “somewhat surprising” and noted that it “truly shows HPE's commitment to dominating the networking market.”
“Both companies are channel-focused,” Howdysell said of HPE, based in Spring, Texas, and Cisco, based in San Jose, California. “It will come down to who can focus better on networking and implement a business plan hand in hand with the channel.”
By leveraging industry-leading AI, the combined company is expected to create what HPE calls “better user and operator experiences” that benefit customers' high-performance networks and cloud data centers.
The agreement makes networking the new core business and architectural foundation for HPE's hybrid cloud and AI solutions, delivered through the HPE GreenLake hybrid cloud platform, the statement said.
HPE said the combined company will offer “secure, end-to-end AI-native solutions built on a foundation of cloud, high performance and experience first, with the ability to collect, analyze and act on aggregated information.” “Telemetry” across a broader installed base.
HPE CEO Antonio Neri said in the statement that the deal represents a “major turning point in the industry and will change the dynamics of the networking market” by offering customers and partners a “new alternative” that meets their most demanding needs .
“This transaction will strengthen HPE's position at the intersection of accelerating macro AI trends, expand our total addressable market and drive further innovation for customers as we help connect the AI-native and cloud-native worlds at the same time creating significant added value for shareholders,” said Neri. “I am excited to welcome Juniper’s talented people to our team as we bring together two companies with complementary portfolios and proven track records of driving innovation in the industry.”
Upon completion of the transaction, Juniper CEO Rami Rahim will lead the combined HPE networking business and report to Neri.
“Our multi-year focus on innovative, secure AI-native solutions has driven Juniper Networks’ outstanding performance,” Rahim said in the statement. “We have been successful in delivering exceptional user experiences and simplified operations, and I believe joining HPE will allow us to accelerate the next phase of our journey.”
The HPE-Juniper combination is expected to achieve operating efficiencies and annual cost synergies of $450 million within 36 months of closing.
The deal – which is expected to close in late calendar year 2024 or early 2025 – will be funded based on $14 billion in term loan financing commitments. That financing, HPE said, will ultimately be partially replaced by a combination of new debt, mandatory convertible preferred securities and cash on the balance sheet.