HPE’s $14bn Juniper deal gets EC green light

• HPE is planning to buy Juniper Networks for $14bn
• It has just cleared a major regulatory hurdle at the European Commission
• But other approvals are needed if the game-changing deal is to be completed

Following a short investigation, the European Commission (EC) has “approved unconditionally” the planned $14bn acquisition of Juniper Networks by Hewlett Packard Enterprise (HPE), stating that the “transaction would raise no competition concerns in the European Economic Area (EEA).”

The approval, which had been the subject of speculation earlier this week, is a major step forward for HPE, as it expects the Juniper Networks portfolio and team will have a transformative impact on its AI and networking capabilities – see HPE confirms $14bn deal to acquire Juniper Networks.

The EC said in this announcement that it “investigated the impact of the transaction” on the global markets for wireless LAN (WLAN) products and wireless access points (WAPs), on the global market for datacentre switches and on the EEA market for enterprise campus Ethernet switches. 

It concluded that the acquisition, which was first announced in January this year, “would not significantly reduce competition on such markets. In particular, concerning the horizontal overlaps between the companies’ activities in the market for WLAN equipment, WAPs and Ethernet campus switches.” The EC added that in the EEA, the combined company’s market position would “remain moderate”, that it would continue to face competition from a wide range of competitors, including strong and established players” in each of the technology product markets, that the two vendors are not each others’ closest rivals and that customers would be able to react accordingly to any WLAN and campus Ethernet switch price increases. 

The EC also decided that, in the EEA, a combined HPE/Juniper “would not have the ability to engage in anticompetitive bundling or tying practices” in the provision of HPE’s high-performance computing (HPC) systems along with Juniper’s switches, because: The vendor “would not have a significant degree of market power either on the market for the supply of mid-range servers or on the market for the supply of HPC systems”; the customer purchasing cycles for the respective products “are different and therefore not conducive to allow any anticompetitive tying or bundling strategy by the merged entity”; the merged vendor “would not obtain a significant advantage by offering its datacentre switches as a bundle with either HPE’s servers or HPE’s HPC systems”; and “competitors could replicate and challenge any tied or bundled products.” 

This will all come as a relief to both vendors as approval from the EC is one of the major regulatory hurdles in such mergers, but other bodies might not be as open to the deal. One of those is the UK’s Competition and Markets Authority (CMA), which launched a merger inquiry into the acquisition in June. The British watchdog is considering whether the acquisition might “result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services,” and is due to share its initial findings by 14 August.

Currently, the two companies expect the acquisition to be completed late this calendar year or in early 2025.  

News of the EC clearance comes in the wake of the latest earnings report from Juniper Networks, which reported a 17% year-on-year decline in second-quarter revenues to $1.19bn and a 68% dip in operating profit to $45m. 

But as is usually the way, there were some silver linings on Juniper’s second-quarter cloud.

“We experienced better-than-expected demand during the June quarter, with orders growing double-digits sequentially and year-over-year,” stated Juniper’s CEO Rami Rahim in this earnings announcement. “We saw particularly robust orders from our cloud customers, many of which have digested prior purchases and are investing to support AI initiatives. We also experienced better-than-expected enterprise demand due to continued momentum in our Mist-led Campus & Branch business and strong demand for our Enterprise datacentre offerings,” he added. 

Juniper’s CFO Ken Miller explained: “Our Q2 financial results were largely in-line with our expectations at the beginning of the quarter. Our teams continue to execute well and we remain optimistic regarding our long-term financial prospects.”

Juniper Networks’ share price currently stands at $37.69, giving it a market capitalisation of $12.4bn. 

In June, HPE reported a 3% year-on-year increase in revenues to $7.2bn and an 18% decrease in operating profit to $425m for its fiscal second quarter that ended 30 April.

- Ray Le Maistre, Editorial Director, TelecomTV