Hewlett Packard Enterprise's acquisition of Juniper Networks for $14 billion indicates that technology companies are still strengthening their network business and trading activity is strong.
On January 9th local time, Hui and (Nasdaq: HPE) reached an agreement to acquire JNPR for $40 per share and a total price of $14 billion, becoming the first major technology acquisition of 2024.
According to public information, Huihe is a global edge to cloud company that focuses on developing cloud computing solutions and conducting enterprise business. It was spun off from HP's personal computer and printer business in 2015 and went public independently.
It is understood that since independence, Huihe has been focusing on expanding profitable business lines, such as high-performance computing and cloud services. On November 28th last year, Huihe announced its financial performance and full year financial report for the fourth quarter of the 2023 fiscal year as of October 31st. The company's annual revenue was $29.1 billion, a year-on-year increase of 2%, or a fixed exchange rate increase of 5.5%; Under Non GAAP, the diluted net income per share (EPS) was $2.15, a year-on-year increase of 6%.
After experiencing a significant decline in merger and acquisition activities in 2023, Huihe seems to want to restart large-scale transactions and agree to acquire shares of Zhanbo Network at a price of $40 per share, which is equivalent to a 32% premium on Zhanbo Network's stock price level before the relevant reports appeared.
According to public information, Zhanbo Network is a network communication equipment company founded in 1996 as a competitor to Cisco. It went public in 1999 and is committed to providing a network experience that can change people's contact, work, and lifestyle. Prior to the acquisition report, Zhanbo Network's stock price had recently stabilized between $29 and $30 per share.
On the 9th, Huihe's stock price closed at $16.14 per share, down 8.92%, with a total market value of $20.982 billion. Zhanbo Network's stock price closed at $36.81 per share, up 21.81%, with a total market value of $11.738 billion.
With the latest AI (artificial intelligence) systems requiring faster communication both inside and outside servers, this transaction emphasizes Huiyu's determination to manufacture hardware and software for data centers, strengthen the supply of network products, and is also the latest large-scale acquisition in the enterprise IT market. Last year, Cisco acquired data and security software company Splunk for $28 billion in September, while Broadcom completed its acquisition of cloud software company VMware for $69 billion in November.
Antonio Neri, President and CEO of Huihe, said, "Huihe's acquisition of Zhanbo Network marks an important turning point in the industry and will change the dynamics of the online market. This transaction will strengthen Huihe's position at the intersection of the accelerating macro AI trends, expand our overall market, and bring more innovation to customers while helping build bridges between AI native and cloud native worlds."
On the other hand, for Zhanbo Network, this transaction means that the survivor who experienced the early prosperity of the Internet will no longer be independent. When it went public in 1999, the stock price of Zhanbo Network almost doubled on its first day of trading, with a total market value reaching a valuation of $65 billion in October 2000. However, after the Internet foam burst, its share price plummeted and never recovered to the previous high.
In 2023, after experiencing a difficult period, Zhanbo Network announced a restructuring plan in October to lay off hundreds of employees as some major customers, including cloud computing and internet service providers, reduced their spending on new equipment. Zhanbo Network has been working hard to integrate the latest AI tools, including incorporating chatbot ChatGPT into its control system for IT administrators.
Earlier on January 9th, after foreign media reported on Huihe's potential acquisition of Zhanbo Network, analysts at Citibank pointed out that this transaction "will expand Huihe's business scope in the enterprise network field, not only including wireless local area networks (WLAN), but also more enterprise and AI businesses as Huihe continues to strengthen its AI products.".
However, Citibank analysts also remind that this will be the largest transaction between Huihe and others to date, and Huihe's experience in large-scale mergers and acquisitions is worrying. In 2011, before splitting into two listed companies, HP spent $11.1 billion to acquire British software company Autonomy, which was later proven to have used improper means to report revenue.