HPE’s potential acquisition of Juniper may propel its position in the global AI race

In a potentially transformative deal for the tech industry, Hewlett Packard Enterprise (HPE) is in discussions to purchase Juniper Networks for $13 billion, according to  Reuters.

This acquisition could be strategically crucial for HPE as it seeks to expand its reach in the AI and related markets that are becoming increasingly competitive.

“HPE is experiencing a plateau in growth within its established market segments,” said Sanchit Vir Gogia, chief analyst and CEO at Greyhound Research. “To catalyze growth, aligning with Juniper could be strategic. HPE’s networking subsidiary, Aruba Networks, would complement Juniper’s robust SD-WAN, cloud, and AI services, potentially enhancing HPE’s market offering and competitive edge in networking.”

Countering competition and arming for the AI drive

This deal presents multiple advantages for HPE. First, the company’s networking portfolio, which currently falls short compared to that of Cisco, will be significantly strengthened through this acquisition, positioning it as a formidable competitor.

“Juniper is a top vendor in the global networking equipment market, trailing behind Cisco, with an estimated annual networking revenue at $2.6 Billion in 2023, excluding security solutions, software subscriptions, and professional services revenues,” said Gina Luk, practice head at TechInsights Telecom Strategies. “The acquisition could boost HPE’s market share, potentially making it a stronger competitor against Cisco and Extreme Networks in the high-growth areas of 5G and cloud networking.”

Perhaps more significantly, the inclusion of Juniper’s AI interests, particularly its Mist AI, is of strategic importance to HPE. This is due to HPE’s shift in computing strategy, which is increasingly focused on enabling a broad spectrum of AI applications.

“Their Mist AI platform is seen as a differentiator and specializes in AI-powered network management,” Luk added. “Potentially, Juniper could strengthen HPE’s portfolio and align with its focus on network management, automation, and ad orchestration.”

Gogia pointed out that this becomes even more relevant as the US government increases investments in domestic chip manufacturing, underscoring the importance of chips in AI technology.

“A comprehensive provider, spanning from data centers to networks, stands to gain significantly in the market, reducing the need for partnerships,” Gogia pointed out. “This strategy could substantially expand the market reach for HPE and Juniper investors.”

Also, the search for alternatives to Nvidia’s dominance in GPUs is intensifying. The acquisition of a company like Juniper by HPE could be a game-changer, offering a comprehensive suite of AI solutions. This move could strategically position HPE across various sectors, from on-premise systems to expansive cloud networks and data centers.

“Juniper offers synergies for its Networking Business where HPE has Aruba line of products for switching and networking,” said Akshara Bassi, senior analyst at Counterpoint Research. “This also expands and strengthens the HPE’s product proposition across the data center segment. As AI demand is expanding, so is the demand for networking in data centers.” 

Challenges to overcome

However, a critical aspect to monitor in the wake of the potential merger will be the overlap in customer accounts, which are expected to be numerous. The impact of these overlaps on revenue streams and sales strategies is a key factor that will likely develop and become clearer over time.

“As is true for most acquisitions, Juniper customers should expect to pay more in the near term from a licensing perspective,” Gogia said. “Additionally, regulatory responses to this consolidation in the networking market will be critical to observe. Regulators will undoubtedly have their perspectives on market concentration, which we will need to consider.”

Another challenge can be in the software integration of HPE and Juniper’s suite of products, which primarily serve the same segment, i.e., networking for data centers and telcos, according to Bassi. There are also concerns that the consolidation may lead to the phasing out of certain redundant products.

“Some customers might be wary of potential product and price changes in service agreements or support policies during the integration process,” Luk said.

Poised to be a strong contender

HPE and Juniper, though both major players in the enterprise networking market, differ in their approaches to both AI and SDN. HPE leans towards on-premises, open-standard solutions, while Juniper focuses on cloud-based, intent-based automation with its own SDN technology. While challenges exist, the rewards of a merger could be massive.

“Blending these technologies seamlessly will require considerable effort to ensure interoperability,” Luk said. “Nonetheless, combining HPE’s AI expertise with Juniper’s SDN capabilities opens doors for advancements in areas like intelligent network automation, self-healing infrastructure, and real-time network analytics, and therefore can cater to a wider range of customer needs and attract new market segments. With a combined focus on AI and SDN, HPE can position itself as a leader in 5G networks and edge computing.”

This could be a shot in the arm for the company that’s almost 100 years old.

“This will definitely make HPE a strong contender in the networking market where Cisco, Dell, and Broadcom have a strong presence,” Bassi said. “With AMD, NVIDIA also strengthening their presence will give HPE an advantage as it provides a more synced offering.” HPE declined to comment on the matter. Juniper has not yet responded to requests for a statement.