Each public assertion from HPE CEO Antonio Neri on the Juniper acquisition has revolved round AI. When the deal was introduced in January, he mentioned: “This transaction will strengthen HPE’s place on the nexus of accelerating macro-AI traits, broaden our whole addressable market, and drive additional innovation for patrons as we assist bridge the AI-native and cloud-native worlds.”
In a latest quarterly earnings name with Wall Avenue analysts, Neri added: “Combining our complementary portfolios will supercharge HPE’s edge-to-cloud technique, accelerating our total portfolio with AI enabled innovation.”
Kindness says Juniper’s Marvis, its AI-powered digital community assistant, is “by far essentially the most superior AI answer within the networking market,” with an estimated two-year lead over the competitors.
And Townsend factors out, “HPE wants additional AI depth to stay aggressive. Juniper might ship on that entrance.”
The shifting panorama
It may not be a coincidence that HPE’s Neri went out and grabbed Juniper proper after Cisco made its blockbuster acquisition of Splunk.
CEO Chuck Robbins says the Splunk deal allows Cisco to “revolutionize the way in which our prospects leverage information to attach and shield each facet of their group as we assist energy and shield the AI revolution.”
Neri is countering with the argument {that a} consolidated Juniper/HPE stack, with key items like HPE’s Slingshot interconnect, can compete with Cisco throughout the board.
In truth, with the Juniper acquisition, HPE turns into a networking-first firm, with networking constituting 31% of whole income, making it HPE’s largest division. It’s going to additionally account for 56% of working revenue, reflecting the upper margins related to networking gear, says Morgan.
That is significantly related since HPE has been struggling to develop server and storage income. In its newest earnings report, whole income was down 14% year-over-year, and the corporate issued steering to Wall Avenue that 2024 income would vary between flat and a 2% enhance. After all, Juniper isn’t precisely lighting the monetary world on hearth both – its newest incomes report confirmed quarterly income declining 6% year-over-year.
Regardless of Neri’s bravado, going head-to-head with Cisco is a tall job, contemplating the top begin Cisco has. Morgan factors out that even when the mixed HPE-Juniper entity managed to take care of all of its enterprise networking income – with zero cannibalization – it could nonetheless be lower than 1 / 4 of Cisco’s market share.
By way of the broader networking business, Kerravala says Arista and Excessive have essentially the most to achieve. He says Arista has positioned itself because the high-end various to Cisco and is working its approach downmarket. Excessive has been efficiently integrating its acquisitions of Avaya, Brocade and Aerohive and “the timing couldn’t be extra excellent as their merchandise are actually in nice form to compete.”
Kindness additionally sees Arista benefitting, noting that Arista will differentiate itself with its “clear and succinct networking focus.”
it from one other angle, the Juniper acquisition beefs up HPE’s networking story because it competes with Dell for patrons who desire a full-stack, one-stop store that features ASICs, networking, computing {hardware}, software program, AI, and companies. “HPE has a marked benefit now over its greatest computing and companies competitor, Dell, which has struggled with regard to networking,” says Morgan.
Townsend provides that the acquisition additionally offers HPE a greater alternative to compete with Dell within the service supplier and telecom infrastructure markets, significantly with cell community operators.
As with every acquisition of this magnitude, all of it comes right down to execution. If historical past is any indication, Cisco definitely has a greater observe document than HPE, though HPE’s latest Aruba acquisition was extremely profitable.
“The final word success of the acquisition will probably be measured by how rapidly and elegantly HPE integrates Juniper,” Kindness says. “There are lots of shifting components to this transaction—deep product roadmap rationalization, expertise retention, and channel companion program reconstitution amongst them. Nevertheless, if HPE is profitable, it might considerably enhance its share of the enterprise networking addressable market and strengthen its communication service supplier enterprise competitiveness on the similar time.”
Morgan sums it up this fashion: “The true take a look at is whether or not the businesses can leverage Juniper’s AI capabilities and HPE’s nicely developed channels to win over new prospects. If the mixed firm can do this, over time it might nicely develop into a menace to Cisco – even with Cisco’s formidable lead.”
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