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Recently, Hewlett Packard Enterprise (HPE) made major business tech news when it announced its intent to acquire Juniper Networks for $14B. This move brings together two of the larger “ABC” companies – also known as Anything But Cisco – and shakes up a networking industry long overdue for consolidation.
Since the news was announced, I’ve had time to digest the implications. Below are my top five thoughts.
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Kickstarting Juniper’s Growth
The acquisition was complimentary and consolidated. Much of the media focus was on the perceived high amounts of product overlap between the two companies. This is understandable, as Wi-Fi is at the heart of both companies’ network strategies. HPE Networking was built on the back of Aruba Networks, which started as a Wi-Fi company.
Similarly, it was Mist Wi-Fi that kick-started Juniper Networks’ enterprise growth. On a post-acquisition analyst call, HPE CEO Antonio Neri and Juniper CEO Rami Rahim did an excellent job showing the complementary nature of the deal.
While both companies do have Wi-Fi, campus and data center switching, and SD-WAN, HPE has the following products Juniper does not: Private 5G, Security Services Edge (SSE), and 5G RAN. Conversely, Juniper brings Enterprise and Telco routers, next-generation firewalls, and Tier 1 switches and routers.
Cybersecurity in Transition
Security is a significant component of the acquisition. When industry watchers pontificated on the news, strong attention was paid to all things networking with security rarely mentioned. This made me curious as to whether HPE planned to spin out the security, sell it off or some other action.
In the analyst Q&A, I asked Neri and Rahim about it, and they walked through the thinking. Rahim stated, “The opportunity to leverage security to make our portfolio more comprehensive and competitive is absolutely part of the thesis here.”
He then talked about the transition that security is going through and added, “Security is moving from on-premises, which Juniper has a broad portfolio in, to the cloud, which Axis Security (recent acquisition), brings to HPE. Although not the highlight of the acquisition, security will play a key role in its success.”
The HPE Full Stack
The combined company makes HPE stronger but moves the needle only slightly in the battle against Cisco.
One of the challenges all network vendors have in their battle against Cisco is the relative sizes of the networking businesses are tiny compared to Cisco. According to Gartner, at the end of 2022, Cisco Enterprise Networking was $24.1B in revenue, HPE was $3.7B, and Juniper $2.1. The combined HPE – Juniper is now $5.8, still miles behind Cisco. HPE had been the number share vendor in North America, and now they are a strong number two, but there is still a way to go to catch the leader.
One advantage HPE has over the field is its ability to bring a “full stack” solution to market, which includes ASICs (both companies have excellent ASICs), network infrastructure, computing hardware, software, AI, and services. For customers that want a one-stop shop, HPE has a marked advantage now over its biggest computing and services competitor, Dell, which has struggled with regard to networking.
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The Network Drives Everything
HPE is now a network-first company. One of the interesting aspects of the acquisition is that when the companies are combined, networking will be 31% of revenue, making it HPE’s largest division. It will also account for a whopping 56% of operating profit, which shows how much higher margin networking is than computing. This dramatically changes HPE’s go-to market as they can now lead with networking, which is critical today as businesses have become network-centric.
All modern technology, from the cloud to mobility to IoT to AI, is dependent on the network for success. Mist AI is of particular interest. When Juniper Networks acquired Mist, it was primarily a Wi-Fi troubleshooting tool. It has since expanded to encompass the WAN, campus, and data center. If HPE can expand the use of Mist to span its entire portfolio, it could offer customers a single AI offer that spans all infrastructure and would be unique in the industry.
Likely Some Consolidation on the Way
Customers need not be concerned. When the acquisition was announced, several HPE customers contacted me with concerns about the fate of the HPE Aruba products. This is sensible as there is overlap in the product lines, so one could assume HPE will keep Juniper and end-of-life all competitive products.
Post-acquisition news, I talked with Phil Mottram, EVP and GM of HPE Networking, and asked him when we might expect some product rationalization. Mottram told me that any kind of move like that would be “commercial suicide,” and the company plans to keep both product lines around for the foreseeable future as that’s what’s best for the customer.
He also explained there was very little networking overlap between HPE Networking and Juniper, so HPE customers can continue to use what they have, as can Juniper customers. He did admit, long term, there will likely be some consolidation, but HPE has always been good about customer communications and provides at least five years notice when products are to be designated end of life.
Bottom Line: HPE and Juniper Networks
Like all business transactions, this one will all come down to execution. The best plans can be derailed by poor execution and HPE has a mixed track record. The ProCurve acquisition went well but 3Com was a mess. Aruba was fantastic but Autonomy was not.
How will Juniper fare? Only time will tell but the person that will lead the combined entity, Juniper CEO Rami Rahim, is an excellent visionary and execution machine. There are many issues to work out including channel overlap, sales, go to market, and product development but I believe Rahim gives HPE the best chance of success. Time will tell.