Juniper Networks announced plans to acquire Mist Systems for approximately $405M in cash.  We think this deal makes sense for Juniper, who can now sell a key technology - WLAN - into its customer base of large and medium enterprises.  Valuation of the deal probably fell a bit short of the expectations of some, but the vendor landscape has already seen significant consolidation between Ethernet Switch and Enterprise-class WLAN vendors, with now just a few potential buyers and sellers.

The companies just had a call to discuss the announcement and share the following messages:

• Slightly dilutive to non gaap F19, accretive F20. 
• Verticals discussed on the call: h/c, retail, mfg and distribution segments
• Key wins discussed:  Large healthcare organization, Verizon Mgd SP, Walt Disney Orlando, Dartmouth College
• Business model will remain as current (60% hardware; 40% services at time of acquisition)
• No revenue numbers share
• $405M in cash; closes F2Q for JNPR
• Avoided saying who Mist competes with, other than to say Mist sees “the usual suspects”
• Mist should continue to grow because its channels will expand when Juniper acquires it
• Juniper will expand the “AI for IT” technology from Mist across the Juniper portfolio of campus switch, security and SD-WAN
• Will imminently begin 802.11ax pilots
• Last time new technology was developed for WLAN industry was over a decade ago; Mist is microservices / container based; all new
• Juniper has seen its campus switch business grow in recent times
• Will share more numbers in the future

There were two main announcements, a new relationship with Google Cloud Platform and a new flash device - the AFF A800. Also, in our interviews with NetApp, we learned about the future of Fibre Channel at the hyperscalers.

Google.  Google Cloud Platform now integrates NetApp Cloud Volumes as a drop-down menu capability as part of the Google console.  This allows enterprise customers, for instance, to use Cloud Volumes to manage their data on Google's cloud service while simultaneously managing their data on premise.  This relationship with Google now rounds out the NetApp relationships with the main hyperscalers - it already has in place relationships with both Amazon (AWS) and Microsoft (Azure).  NetApp Cloud Volumes on Google Cloud Platform is currently available as a "preview" capability (sign up at www.netapp.com/gcppreview) and is expected to go to commercial status by the end of 2018.  Customers will pay Google for the use of NetApp Cloud Volumes.

AFF A800.  New flash hardware available from NetApp, which besides having impressive density and low-latency capabilities supports NVMe-over-Fibre Channel.  Of course, the product also supports 100 Gbps Ethernet.  From a historical standpoint, it is interesting that NetApp, a company whose heritage was driven by storage over Ethernet, is touting Fibre Channel.  But, that's what its customers are asking for in order to accelerate their on-premise workloads such as database (Oracle), ERP (SAP) and other mission-critical enterprise workloads.  In our interviews with NetApp, we were told that Fibre Channel is growing faster than Ethernet - this makes sense given the company's foray in recent years to flash and low-latency workloads.

Fibre Channel at the hyperscalers?  We asked about what is going on with the hyperscalers' architecture to adapt to AI/Deep Learning workloads.  NetApp executives explained that AI workloads are different from traditional workloads; they are random, low latency workloads connecting to GPUs.  This type of workload, we were told by NetApp, works very well when attached to Fibre Channel.  From NetApp's perspective, if customers want to run AI workloads fastest, they would likely do so on-premise, using Fibre Channel.  Yet, many customers run their workloads on hyperscalers, all of which use Internet Protocol and the underlying Ethernet infrastructure.  We have always been skeptical that hyperscalers would adopt Fibre Channel.  We believe the hyperscalers may work with vendors such as NetApp to develop additional software capabilities to address the changing workloads relating to AI/ML/GPU workloads in the future - on top of IP/Ethernet infrastructures.  

​The main theme of the the Huawei HAS 2018 meeting keynotes was Artificial Intelligence and, secondarily, nearly ubiquitous networks connections across the world.  Huawei expects 86% of enterprises to have experimented with AI by 2025 (<5% in 2018).  It is leveraging AI across nearly all its products and will offer a full stack AI solution to all Huawei partners at its @Huawei Connect 2018 conference (Oct 10, 2018).

More specifcially, Huawei is using AI to elevate products & solutions to new levels: cloud, networks, devices, EI, SoftCOM AI, and Intelligent phones.  The company's strategy has changed over time and is now AI-focused:

2006-2011: Single strategy: All IP
2012-2017: SoftCOM: All Cloud
2017+:     All Intelligence: SoftCom AI (autonomous networks / services 2.0) - this reduces operating and maintence costs

The company expects that networks will be 10x more efficient in the operation of equipment as a result of AI.  

By 2025, Huawei expects 440M AR/VR users, 40% of cars to be 'connected," 80% of users with access to mobile broadband, usage of 1 Gbps / user / day (versus .03 in 2018) and 20B connected devices worldwide.


Connected Devices Forecast (Huawei) by 2025: 40B sensors and 100B connections.  This thinking is based on data including that there are: 

• 4B livestock in the world
• 300m streetlights
• 1.8B utility meters
• numerous bike programs in major cities
• numerous greenhouses

The company's product lines are very diverse; to wit, the company introduced a helmet for the blind, which will be available soon.  

Huawei expects NB-IoT (LTE-based IoT capability) to reach almost full coverage in China in 2018.  Additionally, the company expects NB-IoT to reach 100 networks by the end of 2018 (versus 39 in 2017) and to be available on 1.2M base stations (from 0.5M in 2017) and to be connected to 150M connections (versus 10M in 2017).  

The company boasted about several developments:

1. Chipsets for cloud data center systems.  The company highlighted its internally developed Atlas (intelligent cloud hardware).
2. The company expects its cloud services will become one of major 5 clouds.  Uses smart NICs for CPU optimization and is 'open.'
3. The cloud service from Huawei will be low cost because Huawei makes all the equipment necessary to build this cloud
4. Internet of Vehicles system was was built for Group PSA (French auto company known for the Peugot brand)
5. 5-An example of the company's "Intent-Driven Network" was its AI-based premium home broadband for a better user experience on Chinese based PON systems in use today.  Real time data collections allows 40% reduction on door-to-door service and fault prediction of 85% of Wi-Fi faults and 30% of all network faults.
6. AI-enabled, software-defined cameras are now available that perform low-light feature extraction (e.g. facial detection/comparison) over 85% of the time.  And, using the Huawei AI chip, it can outperform CPUs by 25X and GPUs by over 6x.
7. VR/AR will create a $2.7 trillion ecosystem in the future.  The company reminds the audience that it demonstrated teh first CloudVR Proof of Concept at the March 2018 MWC conference.

Q&A after keynote:
Mr. Eric Xu, Rotating Deputy Chairman of Huawei dodged several important questions relating to trade tariffs, cloud business unit revenue targets, growth rates of each major business units, specifics about AI full-stack claims made during the keynote, and instead focused generally on the AI theme.  Xu did, however, however, answer a handful of questions that were quite interesting:  Huawei won't acquire DRAM, Flash companies; and that 5G is not so revolutionary - it is just an evolution following LTE. Additionally, Xu mentioned that in 2H18, Huawei will launch end to end 5G solutions  and by 3Q19, it will launch 5G capable phones.  Xu said Huawei will continue to work with Intel on x86 for the foreseeable future.

More Q&A specifics:
Trade Tariffs and ZTE.  (In a moment of levity, however, Eric Xu smiled when the words ZTE were mentioned - recall that a day earlier, ZTE was penalized by the US).  We will focus on our customers and will ultimately survive. 

Cloud 1.5B by 2020, will you hit the target?  Will offer cloud services to telco service providers.  Huawei smartphones will leverage the Huawei cloud.  Enterprise customers will consume cloud services such as video, computing.  In future, trend will be enterprises will move to hybrid cloud and public cloud will take a major share.  Huawei cloud provides compute/storage/networking to enterprises and government.  200K x86 servers in Huawei cloud.  Revenue with external customers - won't share it with you - maybe .  

AI chipset question:  We don't position chipset as a standalone business - won't sell to external customers.  Will be used to differentiate Huawei products.  Smartphone - we use multi-vendor strategy always; in other worlds; have multiple Qualcomm, NTK and others.  Remain committed to multi-vendor strategy.  Don't want vendor lock-in, however.  If we only have one vendor, what might happen to our smartphone business, Xu asked.  

Enteprise business growth? Declined to comment on specifics, but said he encourages each to grow rapidly.  

How do customers get to 86% AI usage (the question was asked by an audience member by incorrectly referring to the statistic that was made during the keynote - specifically, Huawei said AI experimentation will be 86%, not AI usage)?  Will give clearer answer at Huawei Connect 2018.  For now, can share that we will use AI on ourselves first, then help customers on various functions such as finance, human resources, networks, etc.  

Supply chain - will you acqire your suppliers?  We do joint innovation with suppliers to meet Huawei's needs; push multi-source strategy, however.  Will not invest in DRAM, display, flash.

5G wasn't mentioned much in the presentation, why?  We don't have as high expectations as some others; 5G is just one of many products we offer and is just a natural evolution from 4G.  You don't have a fundamental difference between 4G and 5G - consumers just see faster speed and lower latency.  LTE already support autonomous driving.  Past couple years, governments have regarded 5G as too important.  June 2018, will only address eMBB - faster speeds.  2019 - will have fully 5G compliant system that does low latency.  4G is pretty robust; we don't see 5G as a national coverage network - it'll just focus on city centers.  However, once one carrier announces 5G, then all others must.  50% of Chinese have wireless connection capable of 4K but there are still no 4K stations.

2H18, end to end 5G solutions available.  3Q19, will launch 5G capable phones.

Share trends for Huawei at operators.  Revenue growth of telecom services is a challenging topic.  This revenue growth topic is why titan operators express concern about moving to 5G; instead, Huawei thinks moving to improved intelligence will assist operators.  Video will become more and more important as telcos become media companies too.  

Will AI become a privacy concern?  Any technology has double-sided effects.  With AI, some believe it can be dangerous.  Xu believes in the wisdom of man.  Look back to history of mankind, and our humanity can do same for mankind.

Will Huawei find alternate suppliers for data center products?  (Xu also smiled about this question before answering).  Today, Intel is dominant player.  Our point of view, we look forward to more diversified landscape; but we work with Intel mainly now.

There were 3,100 attendees at the Atmosphere show in Las Vegas, most of which appeared in attendance at the keynote.  Artificial Intelligence and Cloud were the main topics.  Specifically new for the show:  cloud-managed SD-WAN, NetInsight, ArubaEdge Partner program, Cape Networks acquisition.  Cloud-managed SD-WAN – June/July ’18 availability (dynamic path selection, VPC direct to AWS or Azure).  NetInsight is a data-collecting and cloud-analysis AI platform that finds anomalies and allows improvements to wireless LAN operation.  Cape Networks acquisition to allow user-experience simulation for cloud-services connection quality measurement. 

Keerti Melkote, President of Aruba, discussed financials: FY17 was up 15% Y/Y, reaching $2.5B, split 49% to wired and 51% to wireless.  (650 note: for C17, we measure WLAN + non Data Center Switch + Enhanced NAC product revenues at $2,260M).

A key message of the presentation was that as enterprises embrace cloud-services applications like dropbox, Salesforce and Office 365, this means enterprises become more focused on edge access than ever.  Citing statistics like that 80% of advanced attacks  use valid credentials, 8 weeks average gestation period of typical attacks, and 84% of those who’ve deployed IoT have been breached, the company said that securing the edge is more important than ever and discussed the Aruba 360 Secure Fabric. 

​Aruba had customers on stage to endorse various products, including Accenture, Ohio State University, and CBRE.  Other customers mentioned on slides included Lufthansa Technik, Purdue University, Rajasthan, Disney, Time Warner, University of Minnesota, University of New Hampshire, University at Buffalo, Northwestern University, University of Washington, Bucks, Virginia Tech, University of Iowa, Illinois, and Lenovo.