I would like to share some initial thoughts about the groundbreaking announcement that HPE has entered into a definitive agreement to acquire Juniper for $14 B. My thoughts are mostly around the switch business of both firms. The WLAN and security aspects of the acquisition are covered by our WLAN analyst Sian Morgan and security analyst Mauricio Sanchez.
My initial key takeaways and thoughts on the potential upside and downside impact of the acquisition are:
Pros:
- In the combined data center and campus switch market, Cisco has consistently dominated as the major incumbent vendor, with a 46% revenue share in 2022. HPE held the fourth position with approximately 5%, and Juniper secured the fifth spot with around 3%. A consolidated HPE/Juniper entity would climb to the fourth position, capturing 8% market share, trailing closely behind Huawei and Arista.
- Juniper’s standout performer is undeniably their Mist portfolio, recognized as the most cutting-edge AI-driven platform in the industry. As AI capabilities increasingly define the competitive landscape for networking vendors, HPE stands to gain significantly from its access to the Mist platform. We believe that Mist played a pivotal role in motivating HPE to offer a premium of about 30% for the acquisition of Juniper. In other words, Juniper brings better “AI technology for networking” to the table.
- In the data center space, HPE has predominantly focused on the compute side, with a relatively modest presence in the Data Center switch business (HPE Data Center switch sales amounted to approximately $150 M in 2022, in contrast to Juniper’s sales that exceeded $650 M). Consequently, we anticipate that HPE stands to gain significantly from Juniper’s data center portfolio. Nonetheless, a notable contribution from HPE lies in their Slingshot Fabric, which serves as a compelling alternative to InfiniBand for connecting large GPU clusters. In other words, HPE brings better “Networking technology for AI” to the table.
- Juniper would definitely benefit from HPE’s extensive channels and go-to-market strategy (about 95% of HPE’s business goes through channels). Additionally, HPE has made great progress driving their as-a-service GreenLake solution. However, GreenLake has been so far mostly dominated by compute. With the Juniper acquisition, we expect to see more networking components pushed through GreenLake.
- In campus and with the Mist acquisition in particular, Juniper has been focusing mostly on high-end enterprises whereas HPE has been playing mainly in commercial and mid-market. Therefore, from that standpoint, there should be a little overlap in the customer base and more of cross-selling opportunities.
Cons:
- Undoubtedly, a significant challenge arises from the substantial product overlap, evident across various domains such as data center switching, campus switching, WLAN, and security. Observing how HPE navigates the convergence of these diverse product lines will be intriguing. Ideally, the merged product portfolio should synergize to bolster the market share of the consolidated entities. Regrettably, history has shown that not all product integration and consolidation meet that desired outcome.
