HPE's AI Ambitions and Juniper Networks Acquisition: Navigating Regulatory Challenges and Market Growth

HPE working on Plan B if DoJ nixes Juniper deal

AI sales are a little 'lumpy' but all things hybrid cloud are going well - including job cuts Hewlett Packard Enterprise CEO Antonio Neri remains optimistic that US regulators will allow its planned acquisition of Juniper Networks but has admitted the company has considered other plans if regulators nix the deal. The US Department of Justice in March sued to block the $14 billion merger of HPE and the networking giant. Neri has previously said he expects a July trial will clear the transaction and mean the deal closes by the end of calendar 2025. On Tuesday he repeated that prediction on HPE's Q2 2025 earnings call and said company management believes the fastest way to increase shareholder value is to do the deal. "But we also have seen and explored a number of other options if the Juniper deal doesn't happen," he said, mentioning "capital return and other portfolio actions" as alternatives the company has considered. "But we are not going to discuss those until we see the outcome of the Juniper transaction," Neri added. "And we are ... within five weeks of the trial and we hope to get that result and start the integration of the assets." Neri shared more concrete news in the form of HPE's quarterly results, which saw revenue grow six percent year over year to $7.6 billion, sending the company's share price up by around five percent in after-hours trading - despite a $1.1 billion loss attributed to "non-cash impairment of legacy goodwill" related to an unnamed hybrid cloud business. That's no indication of weakness in HPE's hybrid cloud portfolio, which reported double-digit year-over-year revenue growth for the third consecutive quarter. Investors may have liked the fact revenue came in close to the high end of guidance, management's observation that work to improve server margins is on track, or the $1.1 billion of new AI-related sales (and the $3.2 billion backlog of similar systems). Neri also pointed to strong storage growth but also warned that HPE's systems business is "lumpy" because service providers sign big deals that create revenue spikes. Increased enterprise adoption of AI had Neri hopeful that momentum will improve for systems growth. Neri also expressed optimism about HPE's "VM Essentials" server virtualization stack, which it introduced last year in a move seemingly designed to give VMware users concerned by Broadcom's licensing changes another alternative to consider. "We can lower customers' virtualization cost by up to 90 percent," Neri said, before adding "Customer interest in VM Essentials has been very strong." So strong that €9.6 billion ($10.9 billion) Danish engineering firm Danfoss plans to replace 75 percent of its virtual estate with VM Essentials. VMware's owner, Broadcom, covets very large corporations as customers. HPE's Q2 ended on April 30th, meaning it traversed the period during which the USA changed its trade policy and tariff levels several times. Neri said HPE didn't see customers order kit early to avoid tariffs, and "benefited from lower than anticipated tariff impact." The CEO said ongoing cost control efforts will help HPE to cope with future tariffs and forecast smaller tariff-related impact on future performance. One source of savings was a planned five percent headcount cut. Neri said that program has commenced and HPE left Q2 with 59,000 employees - the smallest number since it split with HP Inc in 2015. Neri predicted Q3 revenue of $8.2 billion and $8.5 billion, up from last year's $7.7 billion thanks in part to "a large AI deal" he expects will land soon. HPE forecasts full-year revenue growth of seven to nine percent. ®

HPE CEO Antonio Neri On The DOJ Lawsuit To Block The $14B Juniper Networks Acquisition: 'We Think We Can Win This Case'

"Look there is public information now with (legal) discovery with public filings," said Neri in an interview with CRN. "Basically that gives us even more confidence that we think we can win this case...Nothing has changed from what we have been saying for a number of months since January when they filed the claim." Hewlett Packard Enterprise CEO Antonio Neri said the legal discovery process in the upcoming July court case with the U.S. Department of Justice (DOJ) gives him "more confidence" that HPE can win the case and complete its $14 billion acquisition of Juniper Networks. "Look there is public information now with (legal) discovery with public filings," said Neri in an interview with CRN. "Basically that gives us even more confidence that we think we can win this case. Now you have to go to court and go through the process. But nothing has changed from what we have been saying for a number of months since January when they filed the claim." With the trial scheduled to begin on July 9, Neri said HPE expects to close the blockbuster deal by the end of HPE's fiscal year on November 1. CRN reached out to the U.S. Department of Justice but had not heard back at press time. The DOJ maintained in its lawsuit that the proposed merger would "significantly reduce competition and weaken innovation, resulting in large segments of the American economy paying more for less from wireless technology providers." The DOJ lawsuit zeroed in on the wireless networking market where HPE competes with a number of companies besides Cisco. "We believe the thesis of the DOJ to file a claim was flawed and that their view of the market was so narrow that it does not make any sense particularly in Wi-Fi where we believe there are at least eight competitors in the market," said Neri. The deal was approved by 14 other international regulators including the European Commission and the United Kingdom. HPE and Juniper combined will be able to offer customers a "modern, secure AI-driven edge-to-cloud networking portfolio of product and services, providing "unique differentiation" for the combined company, said Neri. "Ultimately our goal is to provide a simpler way to deploy networking at scale for customers," he said. "By flattening the network, consolidating control planes, we use more AI to manage those networks. This will be the first time - once we complete this transaction- that both companies will have a full stack of intellectual property that we will own. Therefore, we believe that with our engineering DNA the fact that customers are looking for an alternative that we can actually accelerate growth and deliver great shareholder value- not just through the synergies but over time on the revenue growth." In fact, Neri said, the "fastest path to drive shareholder value" is to complete the Juniper Networks deal. One big benefit of the deal is HPE's plan to provide an open ecosystem for AI networking, said Neri. "The network will allow us to connect any type of accelerator and AI needs more ports than before," he said. "That is why I believe the combination of Juniper Networks IP (intellectual property) and talent with HPE IP and talent particularly with our SlingShot (high performance network fabric) and the work we are doing with data center switches will allow us to really provide that open ecosystem and to be able to innovate within that ecosystem. That is one of the theses with Juniper." Neri's comments came after HPE reported non-GAAP diluted earnings per share of 38 cents on a six percent increase in sales to $7.6 billion for its second fiscal quarter ended April 30. That was well above the Zacks consensus estimate of 34 cents per share on sales of $7.47 billion. The strong results prompted HPE to raise the low end of fiscal year 2025 non-GAAP diluted net earnings per share guidance by eight cents per share. HPE shares were up 25 cents per share to $17.92 in mid-day trading.