In an exclusive analysis by theCUBE Research, industry experts assess the breaking news that Hewlett Packard Enterprise Co. has confirmed its acquisition of Juniper Networks Inc. for approximately $14 billion.

The acquisition — HP’s largest since its Autonomy Ltd. purchase in 2011 prior to its split into HPE and HP Inc. — is poised to double the size of its networking business, making it a major contributor to HPE’s annual operating income. The deal is strategically aligned with HPE’s ambitions in the networking sector, leveraging Juniper’s advancements in artificial intelligence, particularly through its Mist AI service, which enhances wireless access and network security, positioning HPE favorably in the burgeoning AI and cloud-native market spaces.

“From HPE’s standpoint, the marriage of HPE and Juniper makes a lot of sense,” said Dave Vellante (pictured, second from left), theCUBE Research analyst. “HPE’s got silicon chops going back to pre-split. If you think about HPE’s as-a-service portfolio, they have compute down with their service business, they’ve got Aruba, and now they’re adding in Juniper. They’ve got storage.”

Vellante and industry analyst John Furrier (left) spoke with Zeus Kerravala (middle), founder and principal analyst at ZK Research; Jake Kaldenbaugh (second from right), managing partner at CloudStrategies; and Steve Mullaney (right), former chief executive officer of Aviatrix, about the benefits and potential drawbacks of this major acquisition.

Strategic expansion or market consolidation?

Is the acquisition a pure consolidation play to lower costs, raise revenue and increase industry leverage or an attempt to combine portfolios for true innovation opportunities?

HPE’s acquisition of Juniper Networks is less about pioneering uncharted technological territories and more about strengthening its current market position, according to Kaldenbaugh. It’s a consolidation play, aiming to unify and leverage the strengths of both companies, he added.

“This deal feels much more like a Broadcom-VMware play than it does somebody who’s reaching for the future,” he said.

The panelists also agreed that the pending deal is seen as a strategic effort to enhance HPE’s edge-to-cloud capabilities and compete more effectively against industry giants such as Cisco Systems Inc.

“If you look at the market and you look at the technology synergies between HPE and Juniper in this deal, particularly how their combined portfolios can put innovation back at the center of HPE’s strategy — specifically in AI and cloud-native environments — this acquisition is expected to double HPE’s networking business, creating a formidable position play against Cisco and others well,” Furrier said.

Future strategies: From boxes to cloud

While the panel highlighted the potential for innovation, especially in AI and security assets, there’s also an acknowledgment that the acquisition could be viewed as a consolidation play, given the current trends in the industry. While the deal strengthens HPE’s portfolio, it’s crucial for HPE to not just focus on physical networking hardware, but also pivot toward software and cloud-based solutions, aligning with the industry’s shift from traditional hardware-centric approaches, according to Mullaney.

“The problem with what they’re doing it’s very much focused still on the physical world of networking, boxes,” he said. “It shifted from boxes to software and cloud about five years ago. They won’t have the growth until they actually start going after where the growth is, which is in the cloud. The growth will come when they really, truly understand that this is a cloud-centric, cloud-first kind of world.”

Also important in assessing the acquisition is the critical aspect of scale in the networking industry, according to Kerravala. The merger could forge a larger entity, better positioned to compete with dominant players such as Cisco. This perspective considers the historical challenges both HPE and Juniper have faced in growing their market share.

With stocks of both companies showing lateral movement, it’s clear that competing in a market led by a heavyweight such as Cisco is no small feat. In networking, where size significantly impacts a company’s ability to serve large, global clients, this merger could be a strategic move to create a more formidable competitor.

“If you combine the two companies together, you get in theory a much bigger company that can compete with Cisco,” noted Kerravala, encapsulating the potential of the deal to transform the competitive dynamics in the networking sector. This analysis underscores the merger’s rationale as a bid not just for growth, but for relevance and competitive parity in a challenging industry.

Here’s theCUBE’s complete video analysis:

Photos: SiliconANGLE