Tech titan HPE eyes $13B Juniper buy for AI networking boost, Juniper stock soars despite restructuring woes.
Hewlett Packard Enterprise (HPE) is reportedly eyeing a $13 billion acquisition of Juniper Networks, focusing on the latter’s Mist artificial intelligence (AI) platform. The news sent Juniper’s stock price surging nearly 25%, while HPE’s stock price dropped around 8%.
The Wall Street Journal reported that HPE was in “advanced talks” to buy Juniper “to better position the nearly 100-year-old technology company in the era of artificial intelligence.” Juniper’s Mist platform has been a significant business driver for the vendor.
Juniper CEO Rami Rahim told an audience at the J.P. Morgan Hardware and Semis Management Access Forum last August that his company’s ability to get its networking foot in the door at an enterprise with either a wireless or wired solution leads to further monetization opportunities. He pegged this at two to three times the original sale, with the Mist platform starting to show a revenue impact.
“For every dollar of wireless, there are $2 to $3 of wired switching opportunities for us to pursue,” Rahim said, adding, “that’s not the ratio of our business right now. However, the wired switching component of the Mist-ified business is growing very rapidly and over time it will start to align more closely to that $1 of Wi-Fi to $2 to $3 of wired.”
Mist AI revenue jumped
Rahim also noted during the vendor’s second-quarter earnings call last year that revenue from products using Mist AI increased nearly 100% during Q2 compared with the same quarter in 2022, with orders growing by 40% over the same time period. The executive also linked that upsell opportunity to its SD-WAN products.
Analysts highlighted the Mist opportunity for HPE, which has been focused on steering its GreenLake as-a-service model.
Bank of America analyst Wamsi Mohan told Seeking Alpha that the deal would deviate “from the strategy to shift to as-a-service, and the AI server narrative we see some merits in providing access to new channels, customers and a larger footprint in networking.”
Mohan also said that “it remains to be seen whether Juniper’s security segment is something HPE would keep over time.”
Last year, Gartner ranked Juniper in a leading position in the enterprise wired and wireless LAN infrastructure space. This was ahead of established rivals like Hewlett Packard Enterprise (HPE)/Aruba, Cisco, Huawei and Extreme Networks.
However, the analyst firm noted a caution on Juniper’s pricing model. “Gartner inquiry and subsequent pricing analysis indicate that Juniper’s bills of material are often quoted higher than customers expect [when] compared with other major network vendors,” the firm wrote.
Juniper’s financial burden and opportunity
The HPE news comes on the heels of Juniper moving forward on a corporate restructuring plan designed to stabilize operations. The vendor filed that $59 million plan in October, which included approximately 440 job cuts.
“The plan results from a thorough review of the company’s business objectives and is intended to focus on realigning resources and investments in long-term growth opportunities,” Juniper noted in an 8-K filing. “The company believes the plan will further allow it to continue to manage operating expenses to deliver improved operating margin prudently.”
Forrester analyst Andre Kindness told SDxCental at that time that Juniper needs to adjust for several reasons that could potentially help the networking vendor to improve. Kindness said one of the adjustments Juniper and other networking vendors needs to do is to shift resources away from hardware-based research and development (R&D) toward software.
“Tech management technologies, including networking, are moving to software-as-a-service-based options as customers demand more pay-per-use models,” he said. “Customers are also asking for AI capabilities to help solve issues quicker and find problems before they arise.”
Juniper’s Rahim told the investor conference last year that the vendor’s Mist platform allows enterprise customers to tackle those issues and free up employees to handle new revenue-generating opportunities.
“We’re reducing trouble tickets at companies around the world by way over 90%,” Rahim said. “Think about what that means to an IT person [who] spends all of his or her time just keeping the proverbial lights on in networking. They are now free to do far more important things for their organizations, not to mention the fact that they become heroes of their organization. I actually think the solution capabilities and the differentiation allow us to alleviate some of the pressures on equipment and software pricing in the solution that we sell up front.”
