Stock Market

Don’t Bet on Tech M&A Wave Following HPE-JNPR Deal

We have our first big merger of 2024. Hewlett Packard Enterprise (NYSE:HPE) is buying Juniper Networks (NYSE:JNPR) for about $14 billion. News of the possible deal leaked Tuesday, sending Juniper shares up more than 20%. The stock was up another 2% Wednesday once the news was official. HPE, on the other hand, tumbled 9% Tuesday due to concerns about the deal price and strategic rationale, before recovering a bit Wednesday.

On the surface, buying Juniper does seem to make some sense for HPE, which has been looking to further bolster its networking business following its 2015 deal for Aruba Networks. Juniper is particularly attractive to HPE thanks to its own deal in 2019 to buy Mist Systems, a leader in both cloud and artificial intelligence networking. (Cloud computing and AI were arguably the biggest and buzziest trends in tech in 2023 and that shows no signs of slowing down this year.)

But should investors start speculating on a new wave of consolidation in the rest of the networking industry or broader tech sector? Probably not.

Don’t Bet on Tech Stocks Tie-Ups in 2024

Yes, many tech giants (especially the Magnificent 7 of the Nasdaq) had phenomenal years last year. But even these tech juggernauts are taking a more cautious approach to 2024. Witness the layoffs that Amazon (NASDAQ:AMZN) announced Wednesday for its Prime Video and MGM Studios units and cuts at Amazon-owned video game streaming service Twitch.

Worries about last year’s interest rate hikes making acquisitions more expensive and the possibility of more regulations and antitrust crackdowns on the tech industry in Washington aren’t helping matters either. Those are just some of the reasons that tech M&A volume was, to quote research firm CB Insights, “subdued”, in 2023 and may not recover much this year.

It’s also not clear if other top networking companies even have the appetite to do big deals right now since several are still digesting other major mergers. Cisco Systems (NASDAQ:CSCO) is yet to close on the $28 billion acquisition of software company Splunk (NASDAQ:SPLK) that it announced last September. Broadcom (NASDAQ:AVGO) just closed its deal for VMWare late last year.

It’s also uncertain if other big tech firms like Arista Networks (NYSE:ANET), Palo Alto Networks (NASDAQ:PANW), Fortinet (NASDAQ:FTNT) or Dell Technologies (NYSE:DELL) will be looking to spend cash for splashy deals either. 

The Bottom Line

With that in mind, it’s worth pointing out that the stocks of several other smaller Juniper rivals, such as Extreme Networks (NASDAQ:EXTR), Ubiquiti (NYSE:UI) and Cambium Networks (NASDAQ:CMBM) have not rallied in the past few days as the market was speculating about a Juniper takeover. It appears that Wall Street and Silicon Valley are not expecting a rush to consolidate, despite the HPE-JNPR deal. Big Tech may not have the urge to merge after all.

As of this writing, Paul R. La Monica did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.