Hewlett Packard Enterprise is looking to become a more significant player in the networking space through its planned $14 billion acquisition of Juniper, a deal that it hopes will make it a more formidable rival to longtime market leader Cisco Systems.

The deal, announced Tuesday after the markets closed, is a big deal in the early days of the new year for a networking industry that has become central in an IT sector that is becoming more distributed and more cloud-native.

During a virtual briefing with analysts and journalists this morning, HPE CEO Antonio Neri described an HPE centered around its networking business that has AI capabilities and its GreenLake edge-to-cloud platform of IT services at its foundation.

“HPE will be a new company where networking will be the core foundation of everything we do,” Neri said. “We’re going to accelerate what we call an AI-driven agenda, and that will allow us to capture this massive inflection point.”

Even when the deal closes – which is expected to happen later this year or in early 2025 – HPE will still likely be in third place in the global networking space behind Cisco and Huawei, but will have a stronger portfolio that will not only include greater AI capabilities but also a stronger presence in both the enterprise and telecom spaces.

Once it closes, Juniper CEO Rami Rahim will lead the combined HPE networking business and report to Neri.

Juniper’s Mist AI is at the Center

Unsurprisingly, AI was a key component of the deal. In a research note, Will Townsend and Patrick Moorhead, analysts with Moor Insights and Strategy, wrote that their thinking after initial news reports about a possible deal circulated was that HPE likely was looking for a “strong AI anchor” for its portfolio of hardware, software, and GreenLake IT consumption services.

“AI is hot, ignited by the attention being directed toward generative AI, the underlying large language models, and many promising use cases,” Townsend and Moorhead wrote. “One could argue that beyond the AIOps capability found in the HPE Aruba Networking portfolio today, HPE needs further AI depth to remain competitive and continue to grow its top-line revenue and profitability. Juniper could deliver on that front.”

Rahim called AI “the biggest inflection since the dawn of the internet itself” and added that the combination of HPE and Juniper “will be able to bring the depth and the breadth of the portfolios necessary to capture the full market opportunity that AI presents in front of us.”

AI in networking is a strength for Juniper, which in 2019 bought Mist Systems and its AI technologies, including the Mavis virtual network assistant, which the analyst wrote serves “as the tip of the spear for Juniper’s reinvigorated efforts within the enterprise for WLAN, LAN, WAN, and SD-WAN solutions.”

“By all measures, the Mist acquisition has been a success, with Juniper growing its enterprise install base at a faster rate than its service provider business over the last 12 to 18 months,” Townsend and Moorhead wrote.

AI and Networking

AI will play an increasingly important role in networking going forward, from dynamically adjusting bandwidth and self-correcting in the network for maximum uptime to quickly finding root causes for problems and deploying virtual network assistants.

In a blog post last month, Liz Centoni, executive vice president, chief strategy officer, and general manager for applications at Cisco, wrote that according to the company’s AI Readiness Index, 95% of survey respondents have an AI strategy in place or being developed but that only 14% are ready to integrate it into their business.

That will change in 2024, as AI becomes central in everything from networks to infrastructure to applications.

“[Generative AI] will offer APIs, interfaces, and services to access, analyze, and visualize data and insights, becoming pervasive across areas such as project management, software quality and testing, compliance assessments, and recruitment efforts,” Centoni wrote. “As a result, observability for AI will grow.”

With Juniper, HPE is looking to grow its AI capabilities. According to Juniper’s Rahim, his company has spent the past seven years building out its AIOps capabilities, with marked results, including seeing revenue from products that use AI growing almost 100% year-over-year for the last two quarters.

“And we’re starting to see early momentum from our investments in enabling and automating AI data centers, including those handling emerging AI training and inference models,” he wrote in a blog post. “This combination [with HPE] will supercharge our offerings in AI-native networking. Together, we will accelerate innovation at every layer: compute, storage and networking; silicon, systems and software; campus and branch, data center and the wide area network.”

GreenLake is a Foundational Part

Neri, in 2019, declared that within three years, HPE would be offering its entire portfolio as a service through the GreenLake platform, which has expanded significantly over the past several years. During the briefing, Neri and Rahim focused on GreenLake as the base for building out a layered AI-driven architecture at a massive scale and what the HPE CEO called the most complete networking portfolio.

“What we’re doing today with this proposed acquisition is to create a new core,” he said. “The core is the network fabric by which we deliver hybrid cloud and AI-native services with the rest of the portfolio we have. We deliver all this unified experience to the same platform called HPE Greenlake, which is a true edge-to-cloud platform. … The core business inside GreenLake – by which we deliver the entire set of services, whether it’s cloud-native or AI-native – is networking.”

The Juniper deal will give HPE the ability to deliver a better experience to users, which is important given that the most difficult part of the architecture is the network, Neri said, adding, “That’s why we believe this changes dramatically who we are and it will increase our relevancy with customers and partners to ways we couldn’t imagine before.”

There’s More to the Deal

Beyond AI, acquiring Juniper will enable HPE to play a greater role in a networking space that has long been dominated by Cisco. According to reports, Neri told HPE employees in a letter that the deal would enable his company to essentially double the size of its networking business and expand significantly in such areas as the enterprise, service providers, cloud environments and – again – AI.

HPE has been growing its networking business for a number of years, in large part through acquisitions, including such companies as ConteXtream and Plexxi. It also acquired the high-performance Slingshot interconnect through its 2019 acquisition of supercomputer maker Cray. In the data center, its most significant purchases were Aruba Networks in 2015 – which has become the core of its networking business – and Silver Peak five years later to bolster its software-defined networking (SDN) chops.

That said, HPE’s networking revenue is about $3.7 billion – a fraction of Cisco’s $24.1 billion – according to Zeus Kerravala, principal analyst with ZK Research. Bringing Juniper – and its 11,0000 employees – into the fold will bolster that to about $5.8 billion, making HPE the number-three vendor in terms of revenue. Still a long way off from Cisco, but HPE would become a stronger rival with more capabilities.

Moor’s Townsend and Moorhead wrote that while there are significant benefits in the merger, there also is a large amount of product overlap that will need to be addressed.

“Serious roadmap rationalization will need to occur, and without a doubt, some solutions will be sunsetted,” they wrote. “There will also likely be a reduction in force as enterprise and service provider networking product teams and internal channel sales and marketing personnel are blended.”