Hewlett Packard Enterprises’ pending $14 billion acquisition of Juniper Networks is still a year from completion, which could provide plenty of time for analysts and the market to parse through the financial variables.

HPE’s bid is a significant 32% premium over Juniper’s stock price just before rumors of the deal hit the news, though it’s only 40% more than where Juniper’s stock bottomed out last year after it announced a corporate restructuring plan designed to stabilize operations.

Analysts were initially high on the deal.

“Financially, this acquisition is a masterstroke for HPE,” The Futurum Group’s Ron Westfall and Steven Dickens, wrote in a blog post when the deal was announced. The duo added that  “it represents a robust investment into HPE’s future,” with financial expectations “contributing significantly to its operating income.”

However, HPE’s stock has lagged since the deal was announced.

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.

Another concern could be Juniper’s disappointing results for the final three months of 2023. 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.

Juniper’s management did not hold an analyst call tied to the earnings due to the pending HPE offer, but spoke of being strategic with its resources during its corporate restructuring announcement last year.

The networking vendor in a Form 8-K filing with the Securities and Exchange Commission (securities exchange commission (SEC)) said it planned to “reallocate resources to efficiently support its strategic priorities” and is expected to cost approximately $59 million. The most significant aspect of the plan is a major reduction in Juniper’s global workforce with the layoffs of approximately 440 people.

“The plan is the result of a thorough review of the company’s business objectives, and is intended to focus on realigning resources and investments in long-term growth opportunities,” the 8-K filing states. “The company believes the plan will further allow it to continue to prudently manage operating expenses in order to deliver improved operating margin.”

Despite the financial hoops, analysts have continued to express positive vibes about the deal.

Gimmie Credit financial analyst Dave Novosel told SDxCentral that HPE’s plan currently stood on solid ground.

“I think right now they're in great shape,” Novosel said. “If in six months the market has changed then things might be a little more difficult, but barring a material change in the markets where things substantially got worse I think they're gonna be fine here.”

Novosel did note that HPE has been generating around $1 billion in free cash flow over the past several years, which gives the company “the ability to knock down some debt fairly quickly.” HPE is also in the process of selling off its 49% stake in its China-based H3C subsidiary which will pocket the company around $3.5 billion.

Novosel also noted that HPE leadership has been fairly quiet on the M&A front over the past couple of years. It has made some smaller moves, like its acquisition of Athonet, but in general has kept a low profile.

The deal also fails to hit the stratospheric $69 billion (including debt) Broadcom paid for VMware or the $28 billion Cisco is paying for cybersecurity and observability vendor Splunk. This could provide HPE a bit of shade in terms of the absolute financial commitment.

“Some companies have been very acquisitive in the past so they have a lot of debt or a lot of leverage coming in, then they're not as prepared financially to do a deal like this,” Novosel said. “Whereas HPE, given where they are right now with their leverage, they're in a good spot to do something like this. They kind of kept the financial flexibility, giving them some firepower to do this.”

Despite some potential product overlap, Novosel added that he does not expect any significant push toward divestitures to close the deal. HPE and Juniper’s leadership have also come out recently and are nearly fully committed to maintaining Juniper’s full product and service offering should the deal close.

“This is a big deal,” Novosel said, adding “but it looks like they have the resources to pull it off.”