Hewlett Packard Enterprise Nears $13 Billion Deal to Acquire Juniper Networks, Enhancing AI Capabilities

Hewlett Packard Enterprise (HPE) is in discussions to acquire Juniper Networks for around $13 billion, a move to enhance HPE’s artificial intelligence (AI) offerings. The deal, expected to be announced this week, aims to capitalize on Juniper’s expertise in network security, AI-enabled enterprise networking operations, and cloud-based AI platforms.

Hewlett Packard Enterprise in Advanced Talks to Acquire Juniper Networks for $13 Billion
Image: Kimberly White/Bloomberg News

Hewlett Packard Enterprise in Advanced Talks to Acquire Juniper Networks for $13 Billion

Hewlett Packard Enterprise (HPE) is reportedly in the final stages of negotiations to acquire Juniper Networks in a deal valued at around $13 billion, according to a reliable source on Monday. An official announcement on the potential acquisition is anticipated to be made later this week.

Following the news, Hewlett Packard Enterprise witnessed a 7.7% decline in its shares, contrasting with a significant 21% surge in Juniper Networks’ stock during extended trading.

The proposed acquisition aligns with Hewlett Packard Enterprise’s strategic objective to strengthen its position in the artificial intelligence (AI) landscape. A Wall Street Journal report earlier in the day highlighted that this move is aimed at enhancing the nearly century-old technology company’s AI offerings.

Hewlett Packard Enterprise refrained from commenting on the Wall Street Journal report, maintaining a shroud of secrecy around the ongoing negotiations. Simultaneously, Juniper Networks has not immediately responded to a Reuters request for comment.

Last year, HPE announced the rollout of a cloud computing service specifically designed to power AI systems, reminiscent of ChatGPT. This move was indicative of HPE’s focus on advancing its capabilities in the rapidly evolving AI landscape.

Juniper’s Diverse Offerings

Juniper Networks, the potential target for acquisition, boasts a diverse array of high-performance network and service offerings. These include routing, switching, Wireless Fidelity (Wi-Fi), network security, AI-enabled enterprise networking operations (AIOps), and software-defined networking (SDN) technologies.

Market Reaction – Pre-market Trading

On Tuesday, in pre-market trading, Juniper Networks’ shares surged by an impressive 23% in response to reports of the potential $13 billion deal with Hewlett Packard Enterprise. The timing for the announcement of the deal could be as early as this week, as per a source familiar with the matter cited on Monday.

HPE’s Motivation Amid Server Business Challenges

Hewlett Packard Enterprise, grappling with sluggish demand in its traditional server business, is seeking avenues for growth. The potential acquisition of Juniper Networks presents an opportunity for HPE to tap into Juniper’s offerings, particularly in the realms of network security and AI-enabled enterprise networking operations (AIOps).

Juniper’s Revenue Growth

Juniper’s Mist AI, a cloud-based AI platform facilitating streamlined operations across wireless and wired networks, has witnessed substantial revenue growth. According to Juniper’s CEO Rami Rahim, Mist AI’s revenue nearly doubled over the past couple of quarters. The strategic plan involves expanding Mist AI’s influence across various layers of the network.

Post-Pandemic Struggles

Both companies have faced challenges in the aftermath of the pandemic-induced demand surge. However, Hewlett Packard Enterprise, with its broader product portfolio, has navigated the slowdown more effectively than Juniper Networks. The latter has grappled with weak demand from wireless carriers and cable operators, exacerbated by stiff competition from industry giants like Cisco Systems and Nvidia in the networking space.

Market Performance and Valuation

Juniper Networks’ shares have experienced a decline of over 17% throughout 2022 and 2023, underperforming against the Nasdaq Composite index. With a market value of about $9.6 billion as of the last close at $30.22, Juniper’s shares were trading at $37.25 on Tuesday. In contrast, Hewlett Packard Enterprise’s stock witnessed a nearly 8% fall.

Analyzing the valuation metrics, Juniper’s price-to-earnings ratio for the next twelve months stands at 12.95, slightly higher than Cisco’s ratio of 12.80, according to LSEG data.

As Hewlett Packard Enterprise inches closer to potentially acquiring Juniper Networks in a $13 billion deal, the market is poised for a significant shift in the tech landscape. The move not only reflects HPE’s strategic commitment to advancing its AI capabilities but also positions the company to address challenges in its traditional server business. For Juniper Networks, the acquisition could provide a lifeline amid struggles in the post-pandemic environment, offering synergies that capitalize on the burgeoning demand for AI and networking solutions. The market eagerly awaits official confirmation and further details on this potential game-changing acquisition.

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Source(s): Reuters; Reuters

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