When HPE announced its intention to acquire Juniper Networks for $14 billion in cold, hard cash earlier this month, it was a bit of a shock. Sure, HP had already bought Aruba in 2015 for around $3 billion. Grabbing another networking company would presumably just add another layer to that business. Of course, there are always complications incorporating one large organization into another, and HP doesn’t exactly have the best record for being a smooth operator where that’s concerned over the years.
But surprisingly, the companies didn’t position this conscious coupling as a pure networking play. In fact, in a blog post announcing the deal, Juniper CEO Rami Rahim suggested it was more about AI. “This combination with HPE is expected to enable us to deliver more comprehensive, more competitive, truly end-to-end experience-first AI-native solutions,” he wrote.
Regardless of how you position it, the deal, which pays $40 a share, or a 32% premium over the closing price on January 8 (per CNBC), represented the kind of offer that was hard for Juniper to refuse. Assuming regulators don’t object — not exactly a given these days — this deal could close later this year or early next. They are giving a lot of wiggle room for regulatory oversight.
Since the deal was announced on January 12, HPE investors seem lukewarm about it; that is, if the stock price is any indication of their sentiment. Consider that on January 8, the day the WSJ broke the news that a deal between the two companies was imminent, the stock price sat at $17.72 a share. By January 12, when the deal was officially announced, the price was down to $15.89, and it has been wallowing there ever since, closing Thursday at $15.92, down almost 8% for the month. That’s not exactly a ringing endorsement.
With a couple of weeks in the rearview to digest this deal, we decided to look at just what this was about, and whether investors should maybe be a little more positive about it. As you’ll see, the companies think the numbers look pretty good, and they really do match up well (so long as HPE doesn’t mess it up).
Is it really about AI?
It’s hard to find anything these days in tech that isn’t being positioned with an AI focus, so it shouldn’t come as a surprise that the companies are making AI the centerpiece of this deal. But is that really accurate?