Yahoo Finance Juniper Jumps Most Since 2004 on Merger Talks With HPE
(Bloomberg) -- Juniper Networks Inc. jumped the most in nearly two decades on news that the company is in advanced talks to be sold to Hewlett Packard Enterprise Co.
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HPE may acquire Juniper for about $13 billion, a person familiar with the discussions said, asking not to be named disclosing private information. An announcement could come as soon as Tuesday, the person said, pending no last-minute snags.
Juniper shares jumped 23% to $37.27 Tuesday morning in New York, the highest since Jan. 16 2004, giving the company a market value of $11.7 billion. HPE shares dropped as much as 9%, the most intraday in more than seven months, reflecting investors’ view that any potential tie-up would be better for Juniper than HPE, especially at this price.
The Wall Street Journal earlier reported on the deal talks. Representatives from HPE declined to comment. Juniper declined to comment on Monday evening and didn’t reply to a new request for comment on Tuesday.
HPE, a nearly century-old technology company that was spun out of the iconic Hewlett-Packard in 2015, has recreated itself as a cloud-services provider and is now focused on expanding its more lucrative businesses such as high-powered computing. But it has struggled to grow at more than about 2% over the past few years and in November the company gave a revenue forecast that fell short of analysts’ estimates after reporting a steep decline in server sales.
Spring, Texas-based HPE’s stock lagged behind most tech companies in 2023, increasing 6.4% while the S&P Information Technology Index jumped 56%. Investors have been concerned about the strength of corporate purchasing of office technology, particularly servers and storage. Chief Executive Officer Antonio Neri has said that customer demand for these products has stabilized and is improving and will be helped by the interest in artificial intelligence.
Analysts at Morgan Stanley said buying Juniper wouldn’t do much for HPE because “it doesn’t appear to have much use for a service provider / cloud routing business.”
Other analysts had concerns about overlapping product lines leading to customer confusion or duplicative efforts by sales teams.
With HPE set to receive $3.5 billion for divesting its stake in H3C, many on Wall Street expected it to make an acquisition or increase share buybacks. Still, several analysts said they were surprised at the size of the offer. At a reported price of about $13 billion, the acquisition would be a significant percentage of HPE’s $21 billion market capitalization.
“HPE’s shareholders have generally hoped that HPE would look to return its excess cash in the form of buybacks or special dividends,” wrote Bernstein Analyst Toni Sacconaghi. “An acquisition of Juniper would shatter those aspirations, potentially placing HPE in a net debt position and facing a significant integration (and inward focus) for the next 1 - 2 years.”
Juniper, like its larger rival Cisco Systems Inc., makes routers and switches that direct the flow of information between computers and across the internet. Its customers include major cloud providers Amazon.com Inc., Microsoft Corp. and Alphabet Inc.’s Google, as well as telecommunications companies such as AT&T Inc.
Juniper also makes corporate wireless networking gear and — like much of the tech industry — has been touting new artificial intelligence services. The company, which reports fourth-quarter earnings on Jan. 30, is expected to generate $5.61 billion in revenue in 2023, about a 6% gain over a year earlier.
An acquisition would “deepen HPE’s data-center and telecom-networking presence, and add a security business, helping to diversify away from the more mature server and storage segments,” said Woo Jin Ho, an analyst at Bloomberg Intelligence.
--With assistance from Ian King.
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