World Stock Watch

HPE CEO Remains Confident in Juniper Acquisition

Despite recent concerns, Antonio Neri, CEO of Hewlett Packard Enterprise (HPE), is optimistic that the company’s $14 billion acquisition of Juniper Networks (JNPR) will close in early 2025. Neri believes the deal will strengthen national security and benefit customers.

A Good Deal for Customers

Neri emphasized that the acquisition will double HPE’s existing networking business, making it one of the biggest deals for the company since it acquired Aruba Networks in 2015. The deal’s approval is crucial, as the Biden administration has been scrutinizing large transactions that could decrease competition.

Overcoming Challenges

Recently, HPE officials met with Justice Department antitrust enforcers to address concerns about the deal. Despite this, Neri remains confident that the acquisition will receive approval in early 2025. The company’s performance has been consistent, with its fiscal fourth-quarter earnings matching Wall Street expectations.

Strong Demand for Servers

The demand for servers has been brisk, driven by AI infrastructure build-outs. Two of the company’s three main segments experienced operating margin expansion in the quarter. HPE’s guidance for the current quarter is relatively in line with consensus forecasts.

Analyst Upgrade

Citi analyst Asiya Merchant upgraded her rating on HPE to Buy from Neutral, citing the potential for stronger revenue momentum and margins ahead. She sees fair value at $26 a share. Of the 18 analysts covering HPE, nine rate the stock a Buy, and nine rate it a Hold.

Financial Highlights

• Net sales: $8.5 billion (+15% year over year)
• Server sales: +32% year over year to $4.7 billion
• Hybrid cloud sales: +18% year over year to $1.6 billion
• Gross profit margins: 30.9% compared to 34.8% a year ago
• Diluted earnings per share: $0.58 (+12% year over year)

First Fiscal Quarter Guidance

• Net sales: up by a mid-teens percentage (in line with consensus estimates)
• Diluted earnings per share: $0.47 to $0.52 (estimate: $0.49)

The AI Landscape

As the AI race continues, veteran tech executive Tom Siebel warns that the hype around AI has gotten out of control, with many companies claiming to offer “God in a box” solutions.