 and welcome to this episode of the Analyst Angle. I'm Shelly Kramer, Managing Director and Principal Analyst here at the Cube Research. I'm joined today by my friend and colleague and frequent collaborator, Ziaz Karawala. Ziaz, welcome. It's great to see you. Thanks, Shelly. It's a pleasure to see you as well. And you know, I know that you just landed in Vegas, ready to head over to the Expo Center and check out CES, and I am not there this year, so I'll be counting on you for all the news. Yeah, and you can tell by the awesome, you know, hotel-type curtains behind me where I'm in some kind of Vegas hotel. They are pretty attractive. So today, we thought we would jump on real quick to talk about the battle of network giants that we see underway with news that came out last night. HPE made a bid to acquire Juniper Networks, and this really sets the stage for sort of a networking supremacy battle, pitting HPE Aruba and Cisco systems against one another. I know that you have thoughts on this, Ziaz. What was your initial reaction when you saw that news? Yeah, well, the news wasn't that they made the bid, that it's a bid as likely to come, I suppose. Yeah. Yeah. You know, it's an interesting acquisition, if it actually happens. And, you know, when we talk about networking giants, let's be real, there's only one networking giant, right? Cisco's enterprise networking revenue according to Gartner is about $27 billion, and no one else is even close to that. In fact, if you combine HPE's network revenue and Juniper's, I put it in my SiliconANGLE post, but the two together would have almost $6 billion, which would put them at number three behind Huawei, but still a distant, this is my Cisco. But I do think in networking, especially when you deal with large global companies, scale and size do matter. Now, this is only the networking portion. HPE, of course, has the rest of the HPE portfolio, right? They're a $30 billion company, and so they're about half a Cisco size and total revenue, but much of that does come from storage, servers, services, things like that. So I do think one of the shifts in the industry, though, that's happened is the world has moved away from a compute-centric kind of IT architecture to one of this network-centric. And part of that is because the network has become essential to really all experiences, right? So if we want to use compute, we use the cloud. If we want to, you know, we use mobile devices, we connect things, you know, with IoT devices, and they're all network-centric, right? So the network plays a really important role in both customer and employee experience. And so if you're a company like HPE, and you've really tried to be one of the premier IT solution companies, you do need to have a robust network portfolio. Now, what's confusingly about this is they have a robust network and portfolio. Their intelligent edge portfolio is made up of some servers and storage, some edge compute devices, but largely from a bunch of network products, right? Well, they acquired Aruba, they acquired H3C, they acquired Silver Peak, and they put together a fairly nice network portfolio. They spent a lot of money and time investing in Aruba Central, which is their management console. They've taken what was largely an on-prem solution, moved that to the cloud, made a cloud native. They've been building AI features into it. And so this isn't an acquisition for technical capabilities. I mean, it is to some degree, because Juniper's got a very good AI platform, but I think it's more about market consolidation. And I've never been a big fan of acquiring for market consolidation because by the time you get through all the product integration issues, and trying to bring the portfolios together, and how do you bring the channels together, you're one plus one, which is supposed to equal three, and now it equals 1.5. And if you remember, HP bought Compact back in the day to do something similar, and they didn't really get the results. That seems like forever ago, doesn't it? Yeah. And so I understand the rationale behind it to create a bigger networking company, but I'm not sure they needed it. The crown jewel of it, though, is missed. Absolutely. The AI ops platform from Juniper. But again, that raises some questions as to what does Aruba do with Central? And I do think Mist is ahead of, in fact, I think Mist is really the market leader here in AI ops. I agree. Very impressive. Yeah. But that alone worth $12 million, $13 million. So that would be the question. If that's what they're acquiring at four, they're spending a lot of money to get a really big portfolio that they only want one little piece of. One little piece of. Yeah. And it is really, I mean, I think the conversations that I have have been all about the integration part of this, and the synergies part of this, and the differences in the product portfolios, and there are so many similarities, and there's challenges and differences in the company's respective channel programs. And so I've seen some channel partners quoted as saying they're very bullish on this and they see great opportunities for them and HPE channel partners. And then I've seen other commentary that this is really, this may bring more challenges than it's worth, which is essentially what you're saying. And I know that you published an article this morning at Silicon Angle and basically said, this was not, you did a great job of outlining the pros and the cons, but that this was not something that you thought was the best move for either company. And I very much agree. Yeah. If HP was a cash rich company and they had a bunch of money set in the bank, then I think you can make an argument for it. But the fact that they've only got, they got 3.4 million in cash, you can't imagine they're going to divert all of this to the acquisition. So let's say they put 2 billion towards this acquisition, that means they're going to have to raise 11 million in debt and interest rates are pretty high right now. And so servicing the debt, we've seen this with lots and lots of other companies, right? Dell EMC and whoever, when you buy a company that's that big and you need to raise debt, then you have to worry about how you pay down that debt along with, you know, so you have to service the debt plus service your shareholders. And that sometimes becomes a vote anchor around you where you can't go do other things that you may want to do down the road. And so I do, in fact, Dave Vellante put that up on Twitter this morning that he was scratching his head trying to understand the economics of it. And that's where I've really struggled with this. Fundamentally, you know, I do think they get a really good company. I think in fact, since over the last five years, we've seen a lot of the top executives from the former Aruba company leave, right? Kirti and Parthen, folks like that. And they'd be getting a very good technical team from Juniper, as well as good platform, but at what cost, right? And so if they could have picked it up, you know, Juniper, you know, needed to sell, and they picked it up at a deal, then maybe it would have been okay. The other part of this from a Juniper perspective is this is a company that has spent the better part of the last five years when they acquired this, transforming their own company. Right. Very successfully. Yes, as a public traded company, the people would need the analogy. It's like changing the wings on a plane while it's flying. It's not anything to do. And so they have finally turned that corner where enterprise is now big in the service provider. And so from a shareholder perspective, I get that you always want to take the quick win. But I think if you wait a couple of years and you allow the investment you made in Juniper to grow, you might have a company that's worth a lot more than it is today. Right. Well, and, you know, to touch on that enterprise business, that is now 38% of Juniper's revenue and the company has said they expect to double that in the course of the next three years. So that makes Juniper incredibly attractive. But then going back to the dollars and cents part of this, how is it possible that HPE is able to take on this debt load and be able to turn it around in the space of a handful of years? And that really, I think, is the biggest challenge. Yeah, I mean that, you know, ultimately, right, you hit the nail on the head there, is if they want to acquire the company, you know, obviously they're going to, I don't think there's going to be any regulatory issues here just because it's, you know, number five by number nine. And you're still a distant number three or two if you're looking at the U.S. markets only. But the question is, is how do they do it in a way that's fiscally responsible? And if you look, Wall Street wasn't exactly bullish on HPE this morning, right? Their stock was down nine percent. So, you know, obviously... Juniper was up. Yeah. Well, the Juniper shareholders are going to like it. Anytime we get a 20% return overnight like that, it's great. So, but from an HPE perspective, it could take a long time for them to recoup this investment. Now, if it is transformative in some way, like they're able to take the MIST AIOPS platform and run that across the entire say HPE portfolio, then that's one thing. But right now, MIST is built from networking. And, you know, we'll see, you know, we'll see if they can do something with it. And, you know, this hasn't even been finalized yet, right? So, who knows, pass a shareholder approval and things like that. So, but it is an interesting thing to speculate on. And I've thought for a long time, there's, you know, we do have a lot of networking vendors. And with, you know, with Arista and Extreme Networks also in this space, ComScope is another Wi-Fi company. We've got a number of emerging private 5G companies, right? So, VMware is a networking as well. And so the networking space is getting crowded. And so perhaps some consolidation is overdue to get the number of suppliers down. But I'm just not sure it's risk consolidation. Yeah, it's rare that you see two companies, say, in the Gartner Magic Quadrant Leader, you know, in that quadrant to actually, you know, merge together, right? It's more likely that a bigger company like an HPE would go and get, like what they did with Ethernet, right? They go get a technology like private 5G and they tuck it into their portfolio to get something that has largely complete overlap with your enterprise portfolio is a little surprising. Yeah, absolutely. Absolutely. Well, and I think that, you know, the big purchase price, you know, the speculated big number, significant product overlap, integration challenges, all of those sort of things, it'll really be interesting to see how this plays out. That's for sure. Yeah, well, best select of both, I guess. Well, thanks for joining me today. I will say the portfolios are both very good. You know, Aruba was, you know, was it when they HPE acquired it. And the good thing they did there was they let Aruba run on its own. And I'd be curious to know if they actually do this, would they do another one of those reverse mergers where the Juniper leadership team now takes control of Aruba, which at that time took control over the HPE network in portfolio, right? So HPE, a lot of the stuff that's been written about HPE is they're not a good acquirer. And if you look at autonomy and things like that, they haven't done a good job. But when they did do a good job on Aruba because they left them alone and let them assume the rest of the HPE networking. And so you wonder if you can do that twice though. Yeah. Well, you know what? Time's gonna tell. I will tell. Just like always. Thanks, Zeus, for making time today to hop on. It's been great. Have a good time at CES, and we'll talk again soon. Thanks.