What's Next for HPE?

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What’s next for Hewlett Packard Enterprise (HPE)? The upcoming few months could be pivotal for the vendor as it navigates several challenges—including the possible failure of its bid to acquire Juniper Networks and its potential moves to compensate for the loss.

Let’s start with the obvious. In HPE’s most recent quarterly earnings, a handful of issues became apparent: First, the vendor has suffered from reduced profitability due to drooping operating margins, particularly in its Server segment, which saw pricing issues last quarter, along with inventory buildup as the vendor shifts from deploying NVIDIA Hopper chips in its servers to installing Blackwell components.

HPE's segment operating margins. Source: HPE

To offset the slump in operating profit margins, HPE is instituting a layoff of 2,500 people, or 5% of its workforce, with most happening this year and a smaller percentage in 2026. The company also plans to lose another 500 employees through attrition. HPE plans to post $350 million in cost reduction from these measures.

In another development, activist investor Elliott Investment Management has taken a $1.5 billion stake in HPE, which could force the company toward resolving some of its problems sooner.

Tariff Trouble

HPE also faces issues from the tariffs imposed by U.S. President Donald Trump. The company realizes more than half of its revenues from sales outside the U.S., and in addition has focused over the past couple of years on moving production overseas, including to India and Saudi Arabia.

India faces a 26% tariff rate on all U.S. imports, which could result in higher-priced servers from a division already suffering from pricing issues. The supply chain actions and pricing tactics HPE said it deployed to mitigate tariffs during its earnings report in early March will likely not be sufficient to cover the more sizable tariff burden imposed in April.

Since it’s so reliant on NVIDIA parts, HPE also must deal with potential fallout from NVIDIA’s supply chain problems. The current tariff on imports from Taiwan, which manufactures NVIDIA chips, is 38%.

Could there be more layoffs to cope with these challenges? If not, what other measures will HPE adopt to deal with its supply chain costs? We reached out to HPE, which responded with declining to comment.

What If the Juniper Deal Falls Through?

One of HPE’s biggest hurdles over the next few months will be the outcome of its bid to purchase Juniper Networks for $14 billion. Since the U.S. Department of Justice sued to block the merger in February, the likelihood of HPE buying Juniper as it now exists seems to be dwindling.

As it stands, HPE must convince the DOJ that its purchase of Juniper won’t create a lopsided market favoring HPE in wireless LANs. As we’ve reported previously, Juniper may have to divest its Mist AI-infused enterprise network management system to make the deal palatable to the government.

That could be problematic, since Juniper considers Mist a vital component of its entire product line, including its wireless Access Points. According to Bloomberg Intelligence senior industry analyst Woo Jin Ho, Mist sales helped generate $572 million for Juniper over the past four quarters.

As of now, the DOJ has set a trial date of July 9, 2025, for HPE to plead its case in the United States District Court for the Northern District of California, where the DOJ filed its suit. If the deal falls through, HPE must pay Juniper an $815 million termination fee. Ouch!

HPE’s Networking Alternatives

In first announcing the Juniper deal, HPE said that the acquisition of Juniper would transform the company, turning it into a networking giant to become a legit threat to Cisco's dominance. If it still wants to pursue this thread.

Given the looming challenges to the deal, HPE faces a few alternatives if it loses its Juniper bid. First, it could choose to focus on its own networking for AI via its Aruba portfolio, which includes HPE's Aruba Networking CX switching portfolio for datacenter through edge with AIOps capabilities via its accompanying HPE Aruba Networking Central management system. So far, though, this limited portfolio hasn't generated enough scale to make HPE a major competitor against Cisco.

To truly gain scale in networking, the only strategy without Juniper would be to put together a larger networking portfolio through M&A, by buying public or private companies. Some of the remaining public companies in the mix (that's aren't Cisco or Juniper) include F5 and Extreme Networks, which could be under consideration. But F5 trading at about $15 billion and Extreme trading at $1.6 billion, buying both of those would have to include a premium and would exceed the value of the Juniper deal. Extreme on its own could make sense.

There's also the private market, including various plays in AI networking and cloud networking. These could tally well with HPE’s relative success with its hybrid cloud platform GreenLake, which scored $1.4 billion in sales last quarter. A glance at the Futuriom 50 report published in February indicates several potential candidates with AI networking and/or multicloud networking (MCN) technology. Some potential candidates might include Arrcus, Aviatrix, Aviz Networks, DriveNets, Netris, and Versa Networks, for example.

HPE could also choose to focus its efforts on AI and its emerging HPE Private Cloud AI solution, which is based in part on its HPE ProLiant Compute DL380a Gen12 AI server. While this approach won't shield HPE from its dependence on NVIDIA, it could advance HPE's enterprise footprint in inferencing and agentic AI. And Servers, after all, are HPEs most lucrative segment.

Additional AI Strategies

HPE might choose to up the ante in its competition with IBM for enterprise data management. In the most recent quarter, HPE said demand for its Alletra storage MP was up triple digits year-over-year. The vendor also released an Alletra Storage MP X10000 that supports unstructured data, which is key to the data management requirements of enterprise inferencing.

These efforts won't solve HPE's problems with margins, supply chains, NVIDIA dependence, and tariffs. More layoffs and cost cuts might help in the short term. Long term, HPE, sans Juniper, will have to rework its strategy to pull ahead in the tech market.

Futuriom Take: Unless HPE can convince the U.S. Department of Justice of the market viability of its purchase of Juniper Networks, it faces alternatives that include shopping for another networking deal, preferably one with expertise in multicloud networking, which tallies with HPE’s hybrid cloud strategy.