5G Factor: HPE Juniper Deal – The 5G Ecosystem Impact

Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.

Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.

Transcript:

Ron Westfall: Hello and welcome everyone to The 5G Factor. I’m Ron Westfall, Research Director here at The Futurum Group. And I’m joined here today by my distinguished colleague, Steven Dickens, our practice lead in the hybrid cloud space. Today, we’ll be honing in on the major 5G ecosystem developments that have caught our eye. Steven, welcome back to The 5G Factor and many thanks for joining today. How have you been bearing up between episodes?

Steven Dickens: I’m doing okay. There’s a bit of a cough that I’ll have to manage at some point, so if you see me sipping from my Yeti cooler, people will know what I’m trying to avoid. But it’s a pleasure being on your show, Ron. I’m enjoying what you’re doing with 5G Factor and looking forward to our conversation today.

Ron Westfall: Well, wonderful. I think that definitely sets us up. And speaking of Yeti and product placement, how about product placement in terms of our new merch here? So just showcase-

Steven Dickens: You showing me up.

Ron Westfall: … the fashion.

Steven Dickens: I didn’t wear mine today. I come on the call and you show me up, Ron. No, you look fabulous as always with your-

Ron Westfall: Well, thanks for the compliments, but believe me, there was no effort here to do any showing up of anybody. It just arrived today. And so a thumbs up. And hopefully, yes, here we are in midwinter, speedy recovery with that cough. And let’s dive right in. Really, today’s show-

Steven Dickens: Busy week, busy week this week.

Ron Westfall: Amen. Exactly. And we already collaborated on really what this episode is going to be focusing on, that is the HPE acquisition of Juniper for $14 billion, and plenty of things to drill down into. And before we do that, let’s basically table set the key details of the acquisition. And fortunately, before this recording, we had the opportunity to join HPE CEO, Antonio Neri and Juniper’s, CEO, Rami Rahim, to gain more insight from them for the motivation behind the deal.

Steven Dickens: And you asked some great questions on that call, by the way. On those calls, I’m always really interested to hear what the other analysts ask as questions. You asked a couple of great questions on that call, my friend.

Ron Westfall: Well, I appreciate it. And again, it’s just always good to have that direct interaction. I think that’s pretty universal in terms of the appreciation for that. And indeed, in terms of the key details, naturally they touched on that. But basically, HPE is acquiring Juniper in an all cash transaction for $40 per share, which represents an equity value of approximately $14 billion. Now, the combination of HPE and Juniper seeks to advance, naturally, HPE’s portfolio mix shift toward higher growth solutions and strengthens its high margin networking business. Indeed, probably going to accelerate its sustainable profitable growth strategy. And on top of that, the acquisition expected to double HPE’s networking business. And that was certainly a key theme that came out of that conversation is networking, getting more marketing emphasis and also portfolio development focus. And the idea is to create a new more formidable networking player with a broader diversified portfolio that can present partners and customers with more choices to drive their business value. And as a result, create more headaches for key competitors. And we’ll touch on that more.

Now, the explosion of AI and hybrid cloud driven business is accelerating demand as we know for secure unified technology solutions that connect, protect and analyze a data of organizations from the edge-to-cloud. Now we expect that these trends in AI specifically will continue to be the most disruptive workloads for the ecosystem, including the 5G ecosystem. And HPE has been aligning its portfolio to capitalize on the substantial IT trends with networking as a critical connective component. And what better way to prove that than acquiring Juniper networks. Now we see that combining HPE and Juniper’s complimentary portfolios in many key areas, now we’ll touch on overlap a little later, can further energize HPE’s edge-to-cloud strategy with an ability to lead in an AI native environment based on, quite simply, foundational cloud native architecture. Together, we expect that HPE and Juniper can provide customers of all sizes with a complete secure portfolio that enables the networking architecture, again, networking, necessary to manage and streamline their expanding and increasingly intricate connectivity requirements.

By using AI, the combined company is expected to create better user and operator experiences benefiting customers’ high performance networks and cloud data centers. And we pretty much agree with that and we’ll provide more detail. And through its suite of cloud delivered networking solutions, software and services, including the missed AI and cloud platform, Juniper is in a more solid position, we believe, to help organizations access the mission-critical cloud infrastructure that basically serves as the foundation for their ongoing AI and cloud strategies. And specifically, the combination with HPE Aruba networking and purposely designed HPE AI interconnect fabric can bring together enterprise reach and cloud native and AI native management and control to simply create a new player that can help accelerate innovation to basically further modernize networking for these hybrid cloud and AI environments. So enough of the table setting, I think many folks out there understand the impetus for the deal and the key details.

Now Steven, from your perspective, what are some first key takeaways that basically are coming from your perspective?

Steven Dickens: So I spent 10 years working at what was HP, what would now be HPE, from 2000 to 2010.

Ron Westfall: Impressive.

Steven Dickens: The business that I worked in, the part of HPE that I worked in, was called Enterprise Server Storage and Networking, ESSN. And I said this on the podcast that we did with Camberley and Krista earlier today. I think what we’re going to see is if I was working at HPE now, it would be networking, servers and storage in order of revenue. And so I think, long-winded way to say, but I think this fundamentally changes the nature of how we think about HPE. I’ve always thought about HP as a computer and storage company that did networking. I think where it will be post acquisition is a networking company that does computer storage. Now, that’s not a bad thing and I think it’s a positive thing. I think it just is indicative of how the company’s going to change.

Ron Westfall: I agree. And in fact, yeah, it’s about the unfolding identity. GreenLake certainly was something that people when they thought of HPE, it’s the GreenLake hybrid cloud proposition and all the capabilities that fall under that umbrella. And yes, the acquisition of Juniper will further strengthen the GreenLake proposition, but also basically again, shift the identity of HPE to a more networking centered organization.

Steven Dickens: Yeah, the thing for me, if you look at Antonio Neri’s time, and I got a chance just to have breakfast with an Antonio after their securities’ analyst briefing back in November. If you look at his time as tenure of the CEO, it’s been a fantastic ride for HPE. He’s done a great job. But I think if you were to look and look at what he’s done best, and we talked about this in our research note, it’s grow the Aruba business. When they acquired it, it wasn’t that big a business. You look at it now, I think you wrote this section of the report, what is it? A sevenfold increase?

Ron Westfall: Yes. Yes, indeed.

Steven Dickens: I mean a sevenfold increase on a business in a competitive market where you weren’t the market leader, that’s impressive by any stretch.

Ron Westfall: Yes.

Steven Dickens: So I think Antonio’s tenureship of HPE, and there’s been some storied CEOs in the past of that company, I think his tenureship of this company is going to be seen as the network era of HPE’s, what is it, multi-decade history. It’s going to be the network era. And that is a good thing. I think for me, the standouts of this deal is it bolsters Aruba, which is the fastest growing and crown jewels. So it’s good. It’s accretive in year one, this is straight to the bottom line, there’s profit, there’s revenue, all of those good things from a financial point of view. The other thing that I think that was talked about a little bit in the analyst call, but it’s maybe not been picked up, and I was chatting to Camberley Bates, one of our research directors and practice leads, this week about it is HP has probably got one of the best channel structures in the industry, bar none.

Ron Westfall: Yes.

Steven Dickens: Juniper gets instant access to that huge global footprint of partners, the ability to slide right into those agreements and have an increased go-to market structure, but also on a truly global level. HPE’s partner structures one of the most diverse and rich and sort of well-structured. So I see this as not only good for HP but good for Juniper as well.

Ron Westfall: Well, yes, I agree wholeheartedly. And let’s flip the script a little bit. Definitely in the terms of the motivation for the deal for what was emphasized in the initial briefings with the analysts is HPE’s enterprise channels and the fact that Juniper’s enterprise portfolio has definitely grown over the last year plus. In fact during their fiscal Q3, it was 50% at least of their revenues. Also, as this is the 5G ecosystem, in terms of flipping the script, what about the telecom sector? And I think-

Steven Dickens: I was going to ask you about that, Ron. This is the 5G Factor Podcast. I think I’m looking at it from the enterprise perspective. I know you have some-

Ron Westfall: We’ll circle back.

Steven Dickens: … really good questions. Yeah, the telecom piece is really interesting for me.

Ron Westfall: Right on. Yeah, it impacts both enterprise and telecom for sure as well as the cloud naturally. So let’s look at telecom first because I think what’s interesting here is that Juniper definitely has an established, proven telecom business. In fact, it could be Juniper helping HPE pulling through more business on the telecom side because of these existing relationships. In fact, the one lead question I had on that analyst call is, what about the telecom sector? What is the merger bringing to them in terms of benefits? And Rahim definitely answered that, I think, very eloquently in terms of, Rami Rahim naturally, the benefits extend to our cloud provider customers and our service provider customers, which of course are the very core of Juniper’s business. And he, quote, “Everybody today is building data centers, distributed data centers, centralized data centers, an ability for the new company to build comprehensive data center solutions with complete automation, AI capabilities will extend across every single segment.”

And that certainly is geared toward the telecom sector. And one thing that I think has been overblown, there’s been commentary like, “Oh, Juniper has been neglecting the telecom sector.” No, that is not the case. What simply has happened is that there has been significant dial back of CapEx across the Teleco sector. Any company that was exposed, certainly to say the North American region of the telecom sector did have to take a bit of a haircut in terms of their financials during 2023. And this is not unique to Juniper, it happened to Ericsson, it happened Nokia, to Corning. You get the idea. Anybody who definitely had a play in the telecom space and was more exposed to it.

So that is not saying Juniper is dialing back, it’s just simply they’re going through what everybody else is going through. Again, the cycles in terms of CapEx. Now as we know they’re going to be peaks and they’re going to be troughs. And quite simply the telecom sector is going through a trough in terms of aggregate CapEx spending. But that doesn’t mean Juniper is taking its eye off that ball at all. Where I think specifically there are benefits… Yes, Steven.

Steven Dickens: Maybe speaking for the listener here a little bit, Ron, I think Juniper’s really well exposed to the telco space, maybe HPE with Aruba a little less so. How do you see this framing? The big sort of question is Cisco, I think Cisco would be seen as the market leader in this space, maybe Juniper’s lower down from a market share and prestige in this space. Where do you see that playing out? Let’s wind forward. This is probably a nine-month regulatory approval. It’s probably a nine month until the deal closes. Then maybe we give them six months to get their act together and get it fully integrated and the product roadmaps to come together. So if we rewind forward maybe 15 months from today, where do you see the competitive landscape with regard to Cisco? That was a big thing for coming on the show for me today, I wanted to get your perspective.

Ron Westfall: Well, yes, and let’s snapshot that right now. I think it’s an important question and that is what are the competitive implications for key players out there? Now in the data center networking space, i.e., when you’re looking at switching routing, quite simply Cisco has been fighting market share loss over the last several quarters plus. That is Juniper and ERISA networks actually have made inroads there. So I think the combination with HPE can actually further boost Juniper in this particular segment. Now looking at 5G overall, yes, I think the combination with HPE can help Juniper’s telecom fortunes. And the fact is when you’re looking at the overall 5G space, I think there is simply new opportunities that will give the new HPE Juniper opportunities that aren’t going to be unique to Cisco or say players like Dell and Lenovo, that is looking at O-RAN specifically.

So that hopefully answers the Cisco specific question. We’ll go back to it when we talk about the enterprise implications, which I think are more significant than say the telecom specific implications. But here, right away, I think if you look at specifically Open RAN, from my view, Juniper’s Open RAN solution provides the intelligent and interoperable programmable mobile network architecture that service providers are increasingly adopting. And this again, I think is one area where they can make competitive inroads and that Cisco doesn’t have a dominating market position in at all at this juncture. And specifically, Juniper’s RAN intelligent controller, also known as Rick, brings that intelligence and programmability to the RAN by enabling third party applications, this is going to be important, that improve service experience, reduce costs, and deliver new business models. So I think HPE can help, again, through the channels to support the third party applications, more influence with the developers and so forth to help drive more Open RAN innovation, let alone overall Open 5G innovation.

And it’s also important to note that Juniper solution is naturally fully compliant with O-RAN specifications and interfaces that enable multi-vendor integration. And that’s ultimately what the major operators are looking for in terms of having more flexibility. They want to get away from the proprietary silo bound RAN architectures of yesteryear and are migrating more toward, again, that Open RAN approach. And I think there’s proof in the pudding. Again, that number 14 billion arises in that we saw AT&T and Ericsson commit to a five-year, $14 billion deal to move Open Ran forward. And those types of scenarios, I think both HPE and Juniper can play a more key role in. Also, I think that the fact that HP offers RAN automation software can definitely enhance the new combined portfolio. So HPE and Juniper in this case are actually complimenting each other as they noted for what is a key motivation for this deal.
Plus HPE created the ProLiant DL 110, Gen10, plus telco server. A little tongue twister there.

Steven Dickens: Easy for you to say, Ron.

Ron Westfall: Well, now I can that I’ve practiced it. Which as we know is a V RAN optimized carrier grade NIBS compliant server that is designed specifically for these emerging edge computing scenarios. So again, it goes back to edge-to-cloud and again, Open Ran and open 5G environments definitely align with that. And what I think is also important are two more areas. One is Juniper’s cloud metro portfolio. I see that Juniper’s Cloud metro multiservice architecture, as we know, consistently delivers the assured user experiences across distributed cloud services. And this is where HPE GreenLake comes in so neatly. So this is, I think why this is a cool idea that the companies are merger and it was probably one of the key motivators for like, hey, let’s get this deal done.

And what it can do is enable network slicing, service aware capabilities, and again, cloud scale, cloud native capabilities that are again essential for meeting the user expectations out there, certainly on the business side, but also on the consumer side while hopefully reducing some of the complexity in terms of the siloed metro operations out there that I already touched on. Plus again, HPE GreenLake can provide a cloud metro lift in terms of enabling Juniper to not have to hop around so much in terms of partnerships at the edge, i.e., the red hats, the VMwares and so forth. Basically that’s like, hey, GreenLake is our preferred partner for addressing these scenarios. And again, it provides a more formidable competitive threat to Lenovo and also Dell in terms of taking advantage of these new cloud edge opportunities across 5G networks. Plus I think one thing that’s interesting is that Juniper actually brands its automation capabilities across the portfolio.

I think that helps in terms of mind share. That is Juniper Automation provides the service assurance that these players needs, i.e., the telecom operators to gain, quite simply a competitive edge in terms of how can we scale Open RAN, how can we scale these new edge capabilities and so forth. Obviously, when it comes to say the OSS BSS portion of the network, all of these processes quite simply have to be automated in order to be competitive in these scenarios.

And finally, the security component. Clearly, Juniper connected security, that’s how they label that part of their portfolio, has been proven very adept at safeguarding the users and applications and infrastructure by quite simply having that visibility across the entire network infrastructure to detect the threats on any front. That as we know is quickly shifting because of things like ransomware and so forth and AI enabled competitive threats. So using AI to fight AI is something that we’ve seen before with other technologies, but hopefully the good guys will win and I think HPE Juniper can definitely align with that. And so in terms of telecom, do you have any additional thoughts, Steven, on what’s going on here?

Steven Dickens: I think there’s a couple of things in what you say, Ron, that are interesting for me. GreenLaking the Juniper portfolio for one-

Ron Westfall: I like that verb.

Steven Dickens: Yeah.

Ron Westfall: GreenLaking it.

Steven Dickens: Yeah, I mean I think you get, the listeners will get the concept. I think the way I look at GreenLake is they’ve probably been the first to market around that as infrastructure consumption as a service on-Prem, probably the most mature model for that. There’s True Scale, there’s Apex, there’s other things coming down the track from other vendors. So I’m not saying they’re unique, but they’ve probably been the first to market and they’ve pivoted most of their business and are furthest ahead there. I think it’s going to be interesting to see that for Juniper. They’re not saying they’re going to do that yet, but I think it would be obvious for them to do that. So that’s going to be interesting. And I think the other piece that you touched on, the big news and the big poll in the tent was the AI story. I think it’s going to be really interesting to see maybe how…

You get the impression that Juniper was further ahead there than where the Aruba guys were. So if that’s a cross pollination back into Aruba, that’s probably a net positive as well. So I think there’s some good synergies here. You and I’ll be on a whole bunch of briefings as this starts to move through. Those are the types of threads we are going to be pulling onto better understand. But I think if they can GreenLake the Juniper portfolio for… I’ve got to come up with a better phrase than that. But you know what I mean? And then apply some of that AI to the Aruba platform. That’s the two plus two equals five stuff that we need to be looking out for here, I think.

Ron Westfall: Yeah, and I think that’s a great segue into what about the enterprise implications. After all, there’s a 5G enterprise ecosystem out there. And I’ll start by noting that when it comes to private networks, specifically private 5G, it’s fundamentally good news, this acquisition. That is HPE as we know acquired Athonet, it’s an Italian based private network specialists but also wireless specialists. And basically in terms of why they acquired Athonet is that they want to combine wifi and 5G on an optimal basis. And I think we pretty much have arrived at a consensus, private 5G is not this across the board competitive alternative to wifi. In fact they will frequently blend together as already do with private LTE, another pre 5G private network implementations and on increasing basis. And we know all these different scenarios, wifi is very helpful or it can be for local connectivity, but when you’re talking about the wide area network, say the mining operation or a vast manufacturing facility, then private 5G makes a lot of sense in terms of layering it in with say an existing wifi implementation.

But what I think is very useful here is that, again, HPE GreenLakes, Edge Compute and Security SASE portfolio can lend a big hand here in terms of pulling through more, say, Juniper wifi capabilities. But also, as you touched on Steven, HPE’s Aruba portfolios already widely deployed throughout many global wifi implementations. And it can also quite simply strengthen HPE Juniper to drive more private 5G and wifi services and business not only on a direct sale basis, but in terms of say supporting operators who are offering it as a managed service to enterprises out there.

And so already Athonet has had more than 450 deployments and so we’re anticipating that number will certainly rise, particularly now with the Juniper infusion. And I think you have an excellent point there about the AI capabilities. As we know there are overlap between say Juniper and HPE Aruba in terms of wifi assets, enterprise switching assets. And naturally you can anticipate that there will be reconciliation. What will be interesting on the software side is how can they advance their reconciliation, i.e., will missed AI become more prevalent and say in terms of HPE Aruba environments or how can they blend the software systems together without disruption, without causing concern naturally amongst their dual customer bases, ultimately single customer base. And so I have a couple more comments on the enterprise side, but Steven, any additional insights on why the enterprise should be excited about the HPE Juniper deal including on 5G capabilities?

Steven Dickens: Well, I mean I think it’s going to be interesting. You look at, I mean at a simplistic level, the HPE account executive who’s responsible for the big global 500 accounts, their footprint in the account just increased and the different type of conversations they can have, maybe they’re able to go deeper into that networking part of the big bank or the telco or the retailer. It fundamentally changes the focus for me. That takes a while to ripple through and we’ll see that maybe in year two. But the account teams take this message in, they start to talk to different people. The Juniper relationships aren’t always the same as the HP relationships. They’ll be chatting to different people. So this just builds a whole different go to market structure. You touched on it a little bit earlier. It’s going to be interesting to see how this ripples through for some of the partners, the people like Red Hat and VMware and all the other technology partnerships.

This probably makes them more important to the global system integrators. So just all of these things start to ripple through and just HPE has grown by this $14 billion acquisition and that just needs to reset in the accounts, in their partners, in their go to market. And ultimately, that translates into their customers. So I think these big pivotal acquisitions, and we’re seeing a bunch of these with people like Broadcom and VMware playing out now that that deal’s closed. We’ve got Cisco and Splunk, that’s on the dock to close this year. All of them changed the landscape materially because Juniper will be no more as a standalone company. And all of that’s now going to be under the HPE remit once this deal closes, arguably September, October next year. Sorry, this year now. We’re into 2024. I got to recalibrate and start thinking that.

Ron Westfall: Right, right. Get on that ’24 bandwagon

Steven Dickens: It’s only 12 days in and I still need to think about it. But no, I mean there’re big reflection points. I mean you’ve covered the details better than I always do, Ron, and that’s why I love working with you. But I look at this from the more seismic level of what this is going to mean at a holistic level and it’s going to be a big impact.

Ron Westfall: Yes, and I think when it comes to valuable mind share, complimenting your observation about account management, all that is important, is that Juniper’s missed AI proposition definitely, from my view, has credence within the overall 5G ecosystem, let alone other related market segments such as data center and so forth. And that, I think, will be a key differentiator when it comes to competing against some of the other players that don’t necessarily have that pedigree. In terms of mind share. Now, I think everybody’s on the AI bandwagon when it comes to anybody who’s targeting the IT space, the tech space and so forth.

However, there have been some key players that have been at it longer. And I think this is something that will help HPE Juniper as a, for example, reconcile existing portfolio lines but also take advantage of new opportunities. And one specific example that I think is intriguing, and I agree with our distinguished colleagues over at Gestalt IT, Tom Hollingsworth and Steven Foskett, that overall this deal is a positive, certainly from a tech perspective, but also it’s interesting that when it comes to 5G technology, this can impact, say CBRS that is unlicensed spectrum and how enterprises use it.

And as we know, Juniper has not formally entered that space, but we can anticipate that they will probably in 2024, again with a lending hand from HPE. And why this is interesting is that going back to private 5G wifi coming together, I think we can also anticipate that the emergence of what can be labeled 5G hotspots quite simply emulating wifi hotspots. The difference being is that it comes with the built-in capabilities of 5G. Again, if you’re an enterprise and organization, you’re looking for policy-based securing of your assets. For example, connected laptops from remote locations. A 5G hotspot can make a great deal of sense. And I think this is again one of those emerging opportunities like Open RAN where HPE and Juniper can be ultimately decisive as this market segment becomes more mature and so forth.

And again, it’s open season. This is a market segment that is in its infancy. And so again, all the usual suspects will be targeting it, but I think HPE Juniper can have an upper hand here in the beginning stages of that specific segment. But get the idea, it’s not just that, but it’s the overall, what can be called 5G enterprise space and being a more formidable competitor, again, to Cisco in this particular area.

Steven Dickens: Yeah, it’s exciting times we live in, Ron. Exciting times we live in for sure.

Ron Westfall: Well yes, and I think we definitely have set the foundation for our perspective on HPE Juniper deal. As people can see, we are pretty positive on it and with good reason. And I think we touched on it and we’ll definitely be revisiting this deal. As we know, Mobile World Congress ’24 is on the horizon and I can pretty much bet that we’ll be revisiting this deal in more detail.

Steven Dickens: There will be more discussions to follow, Ron, I think. Quite the same, right?

Ron Westfall: Exactly. Yeah, I think we have definitely have a level set here. And again, Steven, thank you so much for joining today.

Steven Dickens: Always a pleasure.

Ron Westfall: And again, to our listening audience, our viewing audience, we fully appreciate the support. Don’t forget to bookmark 5G Factor, certainly Futurum Group on your prioritization list of sites to know. And with that, again, everybody have a good 5G day.

Other insights from The Futurum Group:

HPE’s Game-Changing $14 Billion Acquisition of Juniper

HPE GreenLake Lights Up Hybrid Cloud Scoreboard with New Deals

Juniper O-RAN SMO Aimed at Solving 5G Complexity