Why Hewlett-Packard Enterprise Stock Leaped Almost 16% Higher This Week

Key Points

• The company closed a big-ticket acquisition.

• The saga of the Juniper Networks deal is now over.

Hewlett-Packard Enterprise (NYSE: HPE) wasn't a company to wait on a big prize this week. After receiving regulatory clearance for its latest large-scale asset buy, it very quickly closed the deal. Investors were obviously happy about this, as according to data compiled by S&P Global Market Intelligence the company's stock price ballooned by nearly 16% across the week, largely on the news.

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HPE's pending acquisition of Juniper Networks was tangled up in an antitrust lawsuit brought by the U.S. Department of Justice (DOJ).

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Over the weekend, the company announced it had reached a settlement with the DOJ, under which it's divesting a wireless networking unit called Instant On. It also agreed to license the code for Juniper's artificial intelligence (AI) networking platform, Mist AI.

The DOJ had alleged, in a lawsuit filed in January, that an HPE/Juniper tie-up would essentially result in a duopoly in networking equipment. It claimed that a beefed-up HPE and networking incumbent Cisco would hold more than 70% combined of the domestic market.

Several days later on Wednesday, HPE formally announced the close of the Juniper deal, which has been valued at $14 billion. In the press release heralding the news, the buyer wrote that it "doubles the size of HPE's networking business and provides customers with a comprehensive portfolio of networking solutions."

Advancing with AI

It also, at a stroke, makes HPE an important player in next-generation AI networking solutions. As with most technologies that AI can enhance, there is much demand for such products. HPE shareholders, in my view, were entirely justified in trading the stock up on this development.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cisco Systems. The Motley Fool has a disclosure policy.