- HPE finally scored DoJ approval for its $14B Juniper acquisition – with some strings attached
- The company must sell off its enterprise Wi-Fi biz and auction licenses for Juniper’s Mist AI source code
- Analysts say the new deal is a boon for networking competition
The waiting game seems to be finally over for HPE’s $14 billion acquisition of Juniper Networks. The U.S. Department of Justice (DoJ) just gave the deal the greenlight – but not without some caveats.
First, HPE must divest its Instant On business, which sells enterprise Wi-Fi equipment for campus and branch deployments. The company has 180 days to find a buyer who will acquire the assets and all of HPE’s customer relationships for that unit.
Additionally, HPE is required to auction up to two licenses for Juniper’s Mist AI source code, ensuring that “key software assets will be available to rivals looking to compete with the merged company,” said the DoJ.
The DoJ settlement comes after the agency in January sued to block the merger, claiming it would “further consolidate an already highly concentrated” Wireless Local Area Network (WLAN) market. The DoJ at the time said the deal would give two companies – HPE and Cisco – a combined 70% share of the market.
Given HPE wants to double down on core networking packaged with its computing platform, it’s not too surprising the company is willing to offload its Wi-Fi unit, according to Jack Gold, founder and principal at J.Gold Associates.
“Wi-Fi and related smaller businesses are less of their concern, so divesting, either before or after the acquisition, would have been in the cards regardless,” he told Fierce.
Divesting Instant-On also makes sense because it helps “diversify the market at the SMB level” against HPE’s Aruba biz and the Juniper Mist platform, said AvidThink Principal Roy Chua.
“It provides the wider networking market an opportunity to pick up an SMB offering that has a good reputation,” he added.
Chua thinks Amazon, which has set its sights on the SMB market via its Eero Wi-Fi biz, is one potential bidder for the HPE assets. Others that might make a play include Extreme Networks (with its Aerohive assets), Arista, securities companies like Fortinet and Palo Alto or even “private equity looking to establish new entrants in the space.”
As for the Mist source code, it might be more appealing to smaller-scope Wi-Fi providers than to those who specialize in enterprise networking, said Will Townsend, VP and principal analyst at Moor Insights & Strategy.
“I highly doubt that other enterprise networking infrastructure providers will pay to license the software, considering how far HPE’s competitors are along their own AI development paths,” he explained. “However, a handful of smaller consumer Wi-Fi solution providers may take advantage of the licensing opportunity."
What HPE/Juniper means for Cisco
Although HPE-Juniper is shaping up to be a sizable competitor to Cisco, analysts believe the merger will benefit, rather than stifle, the overall networking landscape.
“I’d say HPE is looking to compete more with Dell and its capabilities, than directly with Cisco,” Gold said.
Specifically, HPE and Dell are going head-to-head in the AI server market. The former in January landed a $1 billion contract to provide AI servers for Elon Musk’s X platform, and it reportedly competed against Dell and Supermicro for the deal.
Cisco and HPE both have footholds in the data center switch space. But while Cisco is focusing on hyperscalers, HPE’s customer cohort thus far has been in the mid-size enterprise and data center, HPE exec John Gray previously told Fierce.
“The HPE and Juniper tie-up will do more to foster competition and innovation than thwart it,” Townsend noted. “Customers will benefit by having a stronger second choice for AI-enabled infrastructure after Cisco.”