Shares in Hewlett Packard Enterprise gained Friday after acquisition target Juniper Networks posted better-than-expected third quarter financial results. HPE stock has gained nearly 19% in 2024 amid the pending $14 billion acquisition of Juniper.
The deal is expected to close by year end or early 2025.
The merger will combine Sunnyvale, Calif.-based Juniper's computer networking business with HPE, a maker of computer servers, networking equipment and data storage systems. HPE also gains Juniper's Mist wireless network enterprise unit.
Juniper on Thursday said Q3 adjusted profit fell 20% to 48 cents. Revenue fell 5% to $1.33 billion from a year earlier but rose 12% from the previous quarter and topped estimates of $1.26 billion.
HPE Stock: Strong Cloud Sales
While Juniper's telecom business has slowed, sales to cloud computing data centers rose 30% in the September quarter.
"Overall, it feels like Juniper is starting to see an uptick in demand across their business," said Jefferies analyst George Notter in a report. "The excess inventory conversation is largely behind us. We still believe in Mist and AI-based traffic growth opportunities in the medium- to long-term."
On the stock market today, HPE stock rose more than 2% to 20.03. Juniper stock rose a fraction to 38.97. HPE offered $40 in cash per share for Juniper.
At Evercore ISI, analyst Amit Daryanani said in a report: "Order commentary was a notable positive, with total product orders growing 60% year-over-year, driven by 'particularly robust orders' for front-end and back-end AI networking investments from cloud customers."
Further, Juniper's product gross margin remains under pressure, analysts say.
But "Juniper can generate over $800 million in free cash flow in 2025, which represents a meaningful contribution to HPE once the acquisition closes," said Raymond James analyst Simon Leopold in a report.
Also, HPE stock holds a Relative Strength Rating of 77 out of a best-possible 99, according to IBD Stock Checkup.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
