Hewlett Packard’s networking business set to double as EU poised to approve Juniper acquisition

Hewlett Packard Enterprise (HPE) is on the verge of a significant expansion as EU antitrust authorities are expected to unconditionally approve its acquisition of Juniper Networks.

This strategic move, announced in January, aims to bolster HPE’s position in the rapidly growing networking and AI sectors. The approval could be a game-changer, doubling the size of HPE’s networking business and setting the stage for increased competition with industry giant Cisco.

The European Commission is slated to make its decision on August 1, with British antitrust authorities following suit on August 14.

The acquisition, valued at $40 per share, caused HPE’s stock to surge by over 21% in a single day when first announced. This approval would mark a significant milestone in HPE’s strategic expansion.

Competing with Cisco

HPE had multiple reasons to acquire the networking gear maker. But it was mainly the rush to stay ahead of the demand for services required as a result of the AI boom. Juniper’s main competitor is Cisco and by grabbing the smaller company, HPE can now pose significant threat to Cisco’s networking business.

Here’s what the CEO Antonio Neri had to say earlier in the year:

This transaction will strengthen HPE’s position at the nexus of accelerating macro-AI trends, expand our total addressable market, and drive further innovation for customers as we help bridge the AI-native and cloud-native worlds, while also generating significant value for shareholders.

HPE CEO Antonio Neri

If the deal goes ahead, HPE’s networking business segment will double in size, posing significant challenges for Cisco. As the AI trend continues and companies increase their spending to fully utilize the new technology, HPE will have already positioned itself to take a big chunk of this revenue.

Juniper’s CEO Rami Rahim will lead the networking segment after the acquisition.

Positioning for the new Nvidia chips

Earlier last month, HPE announced a stellar quarterly earnings report beating revenue estimates comfortably thanks to AI related revenue. During the earnings call, the management pointed out how companies will have to switch from water cooled servers to direct liquid cooling. This will present HPE a great chance to improve its topline, especially when the Blackwell line of Nvidia’s GPUs comes out.

The CFO clearly thinks that data centers will get more and more complex and HPE’s solutions will offer companies the right product to manage these complex systems.

That’s going to be a real differentiator for customers because customers will want to go to work with someone where not only do you have the intellectual property and sort of the plumbing, but you’ve got the know-how around how to manage that data-center environment, because these data centers are going to become quite complex to manage

CFO Marie Myers

Since its last earnings report earlier in June, the stock has lost its momentum and is offering a good buy opportunity. An entry at this point could give investors a chance to capitalize not only on the eventual acquisition news but also on the pre-earnings rally for the next quarter.