Juniper Networks managed to buck industry trends and actually grow its WLAN revenues during the final three months of last year, highlighting another potential bonus for Hewlett Packard Enterprise’s (HPE) pending $14 billion acquisition of the networking vendor.

Dell’Oro Group reported that Juniper grew WLAN revenues both year over year and sequentially during the fourth quarter of 2023. This despite overall WLAN market revenues sinking 26% in Q4.

Dell’Oro Group Research Director Siân Morgan noted in the report that “Juniper Networks was an outlier in the WLAN market in [Q4] … despite the difficult market conditions.” Morgan attributed this to Juniper’s artificial intelligence (AI)-focused Mist platform gaining traction in the market.

What's helping Juniper?

“I think that Mist is really resonating, that's what I'm hearing in the market,” Morgan said in an interview with SDxCentral. “Enterprises are finding the solution very compelling. They've done a great job marketing it as well in terms of the functionality. They've had some great customers come forward and say how it's revolutionized their business.”

Morgan also added that Juniper’s growth was helped by the vendor’s overall smaller market share, but “their message is really resonating.”

Juniper’s WLAN growth was one of the vendor’s Q4 bright spots. The vendor reported a 5% year-over-year increase in revenues to $5.6 billion, but a 6% year-over-year drop in Q4 and a 2% sequential decline in revenues.

Bright spots are key for HPE as investors have so far been lukewarm to the pending acquisition despite analyst enthusiasm.

What might not be helping

Some of that investor concern has been linked to the overall financial commitment. The enterprise networking company’s market cap is around $20 billion, which puts the $14 billion purchase price at around 70% of HPE’s standing market capitalization. However, HPE did generate $29 billion in revenues last year and nearly $2.9 billion in net income.

HPE has stated that it will pay for the deal with financing commitments that will eventually be replaced by a combination of new debt, mandatory convertible preferred securities and cash on its balance sheet. The combination is expected to achieve $450 million in operating efficiencies and run-rate annual cost synergies within 36 months after the deal closes.

Morgan said that Juniper’s ability to grow WLAN market share under the cloud of its pending acquisition will be closely monitored in 2024.

“I think that there's a risk — definitely — while we're waiting for the acquisition to take place that customers will hold off purchasing or renewing,” Morgan said. “There is a risk that customers will be scared about portfolio rationalization that might happen, so we have to watch that carefully.”

That risk also applies to HPE’s Aruba platform, which has a larger share of the WLAN market. Morgan’s mid-year 2023 report had cited HPE and Cisco as both driving market growth.

“There definitely is overlap, and wireless LAN, in particular, is an area where there's a lot of overlap between the two companies,” Morgan said of HPE and Juniper. “It's definitely an area where customers could be concerned.”

Cisco slows but remains No. 1

As for Cisco, Morgan noted that despite slowing sales the vendor remains a dominant No. 1 in the market.

“There's suffering now because they had such huge volumes of shipments last year and now there's this digestion period where enterprises have ordered in advance, they've already got their equipment that they needed for 2024, some general partners ordered too much equipment, so there’s just a digestion period,” Morgan said. “That's precisely why Cisco is down this quarter.”

Cisco this week shuffled its executive ranks in hopes of regenerating momentum in the market. CEO Chuck Robbins told investors during the vendor’s most recent earnings call that Cisco was being operationally cautious in the near term due to continued customer uncertainty.

“In terms of the macro environment, we are seeing a greater degree of caution and scrutiny of deals given the high level of uncertainty,” Robbins said. “As we’re hearing this from our customers, it’s leading us to be more cautious with our forecast and expectations.”

That caution also drove Cisco’s move to cut 5% of its workforce, which is around 4,000 total jobs. Analysts tied part of that move to Cisco being challenged to better integrate AI into its operations.

“Cisco is a great company that has a lot of AI but still is not able to make the transition with the implementations and integrations as quickly,” said Daniel Newman, CEO of the Futurum Group, during a podcast on Cisco’s latest earnings. “And it needs to reduce its cost to make sure it can deliver on its promise to its shareholders, which is always a very tough predicament to be in.”

WLAN digestion to continue into 2024

Morgan explained that the market worldwide was stuffed with equipment that customers were challenged to install, which led to a dearth of new equipment orders during Q4. However, Morgan has been surprised by the market’s inability to account for the swing.

“Supply constraint was kind of new to the industry and that was a phenomenon that was never seen before,” Morgan said. “But we knew from talking to all the different industry players, so in January 2023 we called that there would be a downturn. It's hard for me to believe that they didn't know either and especially since some of them buy my reports.”

China-based vendor Huawei was cited as the only other WLAN vendor to grow revenues year over year in 2023. This was helped by China posting the smallest year-over-year market contraction rate.

Despite the widespread downturn, the WLAN market still managed to rack up a record $10 billion in sales for 2023.

That increase came despite Dell’Oro Group finding average device pricing actually dropped year over year in 2023, which was the first decline in more than two years. The research firm added that “controller” and “license” prices did increase last year.

Dell’Oro Group also found the percentage of Q4 revenues from indoor Wi-Fi 6E access points was flat sequentially, with Wi-Fi 7 equipment posting the only technology-based quarter-over-quarter gain; and that revenues from public cloud-managed WLAN dropped year over year across the last two quarters of 2023.

Looking ahead, Morgan added that the market downturn will continue this year, and “vendors that generate recurring revenues from existing customers, as opposed to relying solely on sales of new shipments, are expected to fare better during the downturn.”