Former maker of expensive printer ink HPE is buying Juniper Networks in a £11 billion deal that sets up a fight for network supremacy in the AI era between HPE Aruba Networking and market leader Cisco Systems.
HPE said the deal to buy California-based Juniper gives it more AI networking power and doubles its networking business, making what it called in a statement a “new networking leader with a huge portfolio that gives customers and partners a tempting new choice to drive business value.”
HPE is paying £31 per share in a cash deal that expects to boost its non-GAAP EPS and free cash flow in the first year after the deal closes.
On a pro forma basis, the new networking segment will go up from about 18 per cent of total HPE revenue as of fiscal year 2023 to about 31 per cent and make more than 56 per cent of HPE’s total operating income.
The combined company is expected to use top AI to make what HPE called “better user and operator experiences, helping customers’ high-performance networks and cloud data centres.”
As a result of the deal, networking will become the new core business and architecture foundation for HPE’s hybrid cloud and AI solutions delivered through the HPE GreenLake hybrid cloud platform, according to the statement.
HPE said the combined company will offer “secure, end-to-end AI-native solutions built on the foundation of cloud, high performance, and experience-first, and will also be able to collect, analyse and act on aggregated data” across a broader installed base.
HPE CEO Antonio Neri said the deal is an “important turning point in the industry and will change the dynamics in the networking market” by giving customers and partners a “new alternative” to meet their toughest demands.
“This deal will strengthen HPE’s position at the centre of speeding up macro-AI trends, grow our total market, and drive more innovation for customers as we help connect the AI-native and cloud-native worlds while also making more money for shareholders,” said Neri.
“I am excited to welcome Juniper’s talented staff to our team as we bring together two companies with matching portfolios and proven records of driving innovation within the industry.”
The HPE-Juniper mix is expected to make operating savings and run-rate annual cost savings of £350 million within 36 months after the deal closes.
The deal – expected to close in late 2024 or early 2025 – will be paid based on financing promises for £11 billion in loans.
That financing, HPE said, will finally be replaced, in part, with a mix of new debt, mandatory convertible preferred securities and cash on the balance sheet.
