AI is fueling mergers. Here are two that make sense. – Crypto News

For HPE, the fit is particularly good. Juniper, a networking equipment firm, puts it in a much better spot to compete against Cisco Systems and Nvidia in the market for the high-speed networking equipment that is required in AI data centers.

HPE shares rose 12.6% on Monday, making it the top performing stock in the S&P 500 on the day. The deal officially closed on Wednesday.

Success breeds imitation, and there may be other legacy tech companies looking to the merger market to improve their AI position. I’m not an investment banker, but here are some deals I wouldn’t be surprised to see—and that could get a good reception from the market.

Oracle and C3.ai: Oracle is a prime candidate to add AI to its software through an acquisition.

Oracle has already begun transforming itself for the AI age. With perfect timing in 2020, Oracle began running the Microsoft playbook: Transform from a legacy software maker into a cloud company. It has been moving customers to cloud-based versions of its software with annual subscriptions, while at the same time building large data centers to rent out cloud servers for AI and traditional workloads. In fiscal 2025, revenue from the cloud was up 24%, while the rest of Oracle was flat on the year.

Ironically for a software company, Oracle’s AI play to date has largely been in hardware: AI cloud servers. It could use an AI software merger that, grafted on to existing Oracle offerings, would leverage the mountains of proprietary data customers have in Oracle databases.

Enter C3.ai. C3’s offerings would fit nicely on top of Oracle’s software. C3 has 130 ready-made AI applications tailored for different industries, solving problems and helping to predict outcomes. Today, its customers are clustered in energy, manufacturing, government, and the military.

C3’s revenue grew by 25% to $389 million in fiscal 2025, but it posted a $289 million loss. The culprits were sky-high expenses, 183% of revenue. But in a merger, sales and administrative expenses, which together represented 86% of revenue, would be trimmed heavily once integrated into Oracle’s large sales force and bureaucracy.

After a sharp selloff this year, C3 has a $4.2 billion market capitalization. Oracle could use its $11 billion in cash, or its stock, which trades at a premium to its historical price/earnings ratio for the next 12 months. Paying with cash could hamper Oracle’s plans for data center investment, coming in at $21.2 billion last year, tripled from the year before, and future plans may require more debt, now at $109 billion. In the end, competing capital requirements may be the largest hurdle for this merger.

An Oracle/C3.ai merger would face one obstacle right off the bat. The company’s founders have a history. C3 CEO Tom Siebel was among Oracle’s early employees, and became a top salesperson. In the early 1990s, Larry Ellison, Oracle’s chairman, rejected Siebel’s idea for a new product. Siebel left Oracle and took his idea to form Siebel Systems, which became successful.

As Siebel’s software got traction, a long war of words emerged between the two. In the end, Ellison and Siebel made up enough to agree to an acquisition, with Oracle paying $5.85 billion for Siebel Systems in 2005. Another deal would make sense.

Check Point Software and SentinelOne. Check Point Software Technologies is a pioneer in cybersecurity. Its software builds a wall around corporate networks, but increasingly, workers are doing things outside those walls, like working from home or using cloud applications. Check Point also has a cloud-security product that is mature and integrated with its network security.

SentinelOne’s strength is AI-driven “endpoint security,” proactively protecting employee devices no matter what network they are connected to. Check Point has its own endpoint solution, but SentinelOne’s is a more popular product.

Check Point grew revenue by 6% last year, a much slower pace than 20 years ago, but it also generates a lot of free cash flow, which has largely gone to share repurchases. Check Point has reduced its share count by 55% since 2005, becoming a classic “value” play. Now it could turn back to growth.

SentinelOne is a much younger company, growing smartly. Revenue rose by 32% last fiscal year, but, like C3.ai, it took a huge loss, with total expenses at 140% of revenue. Some 82% of its revenue went to sales and administrative costs, the kind of expenses that would be greatly reduced after a merger, also thanks to Check Point’s larger scale and existing sales force.

SentinelOne has a market capitalization of $6.8 billion, and the stock is down 12% over the past year, versus a gain of 12.5% for S&P 500.

The bet here is that a combined offering covering network, cloud, and endpoint security would allow Check Point to upsell its existing base of over 100,000 customers. Check Point had just $1.5 billion in cash and short-term investments at the end of March. The deal could be all-stock, or Check Point, which has no debt, could borrow to finance the purchase.

As with any deal, integration is expensive, so shareholders would need to be patient. It could be worth the wait.

Write to Adam Levine at adam.levine@barrons.com