The Wall Street Journal reports that Hewlett Packard Enterprise (HPE.US) is in late-stage talks to acquire server and network services equipment maker Juniper Networks. The deal is valued at $13 billion, sending Juniper's stock up more than 21% today. The Juniper acquisition would be HPE's largest since 2011, when the conglomerate absorbed Autonomy. The decision is expected to be announced this week. Is it all about Juniper's 'Mist AI'?
- Juniper is the strongest company in the S&P 500 today and is trading at a record session since 2004. Hewlett Packard's stock is the weakest company in the S&P, as investors don't like the vision of financing a huge, risky acquisition
- Juniper is in the business of selling networking equipment: from switches used in databases to routers. The company also operates Mist Systems and the Mist AI platform, a competitor to the services of Cisco, HPE and Arista Networks.
- The deal is aimed at strengthening the company's division benefiting from the artificial intelligence segment. The interest was suggested by HPE CEO Neri, who stressed that Hewlett Packard Enterprises intends to invest in artificial intelligence, in order to keep business models up to date
- HPE reported a year-on-year revenue decline of more than 30% in its server segment, the Q4 2023 report reads. The Juniper acquisition seems aimed at 'updating' the business in a sector where the latest solutions addressing databases (Arista Networks) are starting to dominate. From this angle, it seems that the Juniper acquisition, although costly, could pay off for the company in the long term and make its offerings more competitive
- HPE's networking division, i.e. Intelligent Edge, saw a 40% year-on-year increase in sales, with a 37% increase in the AI division. Juniper's Mist AI revenue posted a record quarter (close to 100% y/y growth) in Q3 2023, and it appears that complementing HPE's services with Juniper's business could have a favorable synergistic effect on the company, in the long term. The $13 billion valuation of the acquisition is more than 30% higher than the $9.5 billion capitalization of Juniper observed yesterday.
HPE.US chart (D1)
Source: xStation5
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