In an effort to keep pace with the accelerating AI arms race, cloud services provider Hewlett Packard Enterprise Co. on Tuesday agreed to acquire Juniper Networks, Inc. In a deal worth about $14 billion.
Under the terms of the deal, Hewlett Packard Enterprises HPE will,
will acquire Juniper JNPR,
— which makes communications networking products and also has an artificial intelligence chip called Mist AI — for $40 a share. The companies expect to close the deal late this year or early 2025.
“The acquisition is expected to double HPE's networking business, creating a new networking leader with a comprehensive portfolio that offers customers and partners a compelling new option to enhance business value,” the companies said in a statement.
Following the closing of the transaction, Juniper CEO Rami Rahim will lead HPE's shared networking business, reporting to HPE CEO Antonio Neri.
“This transaction will strengthen HPE’s position in the nexus of accelerating total AI trends, expand our total addressable market, and drive further innovation for customers as we help bridge the gap between the AI-native world and the cloud-native world, while also generating significant shareholder value,” Neary said in a statement. statement.
HPE said the addition of Juniper will boost margins and result in up to $450 million in annual cost savings within three years of closing the deal, as well as accelerate growth. HPE's networking segment was the company's main source of quarterly pre-tax profit, at $401 million, on revenue of $1.4 billion.
HPE's deep dive into networking closes a chapter of sorts. Hewlett-Packard then acquired Aruba Networks for about $3 billion in March 2015, months before the original Silicon Valley startup was split in half, creating HPE, which sells servers and other equipment for data centers, and HP Inc. HPQ,
Making computers and printers.
The Wall Street Journal reported on Monday the possibility of a deal, sending Juniper shares soaring.
Juniper shares JNPR,
It rose 0.5% after hours, after jumping 21.8% during regular trading hours. Hewlett Packard HP E,
Shares fell 0.4% in after-hours trading, after falling 8.9% during the day.
As of Tuesday's close, Juniper's market cap was $9.64 billion, while HPE's market cap was $23.04 billion.
The companies hope the deal will provide a much-needed boost after a string of lackluster quarterly profits. Juniper shares are up 15.7% over the past 12 months, while HPE shares are down 5.4% over that period. Standard & Poor's 500 Index SPX,
In comparison, it rose by about 21.4% over the past year.
For decades, Juniper has lagged behind rival Cisco Systems Inc. CSCO,
In the networking equipment market. In the most recent quarter, Juniper reported net income of $76 million on revenue of $1.4 billion, down 1% from the same quarter a year earlier.
“I see this connection playing a strong role in meeting the growing demand for networks to power AI,” said Daniel Newman, CEO of Futurum Group, in a letter to MarketWatch.
