Hewlett Packard Enterprise to buy Juniper Networks for $18.6 billion in expansion bet
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Hewlett Packard Enterprise chief executive officer Antonio Neri said the purchase represents an important inflection point in the industry.
PHOTO: REUTERS
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New York - Hewlett Packard Enterprise (HPE) agreed to buy Juniper Networks for US$14 billion (S$18.6 billion) in an attempt to spruce up the company’s artificial intelligence (AI) offerings.
The acquisition price represents more than half of HPE’s US$21 billion market value and at US$40 a share in cash is a 32 per cent premium over Juniper’s closing price of US$30.22 on Jan 8 before talks of a deal emerged.
The purchase “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”, HPE chief executive office Antonio Neri said in a statement.
Since Hewlett-Packard was split in 2015 into two companies, HPE has focused on trying to expand lucrative business lines such as selling high-powered computing and cloud services. But the company has struggled to grow at more than about 2 per cent over the past few years. In November, HPE gave a revenue forecast that fell short of analysts’ estimates after reporting a steep decline in server sales.
Juniper makes routers and switches that direct the flow of information between computers and across the internet. Like much of the tech industry, Juniper has touted the potential for new AI services to boost growth.
The acquisition comes at a time when the AI gold rush has led companies to pour billions of dollars into upgrading and developing new wares and is expected to double HPE’s networking business.
HPE, grappling with sluggish demand in its traditional server business, is looking to tap into Juniper’s offerings such as network security and AI-enabled enterprise networking operations (AIOps).
Weak demand from inflation-hit wireless carriers and cable operators, as well as stiff competition from Cisco Systems and Nvidia in the networking space has been a drag on Juniper.
Shares of HPE had their worst day since May 2020 on Jan 8, falling 8.9 per cent following reports the deal was imminent. Some analysts questioned the potential acquisition, saying HPE’s purchase of a legacy tech company like Juniper could complicate its growth initiatives. Others called out the risks of an increasing debt load or overlapping product lines leading to customer confusion.
“Juniper has long been a struggling asset with share losses/high exposure to the service provider market, and it is unclear how simple integration will be, given different software stacks,” Mr Toni Sacconaghi, an analyst at Sanford Bernstein, wrote.
Analysts estimate its annual revenue will decline 2 per cent to US$5.51 billion in 2024. Juniper had 11,506 employees as of Sept 30. BLOOMBERG, REUTERS
