Hewlett Packard Enterprise (HPE) has gained Department of Justice (DOJ) approval for its pending $14 billion acquisition of Juniper Networks, agreeing to a handful of potentially significant conditions but avoiding a looming court date that analysts noted could have gone either way.

Per an early weekend agreement, HPE has agreed to divest its Instant On wireless LAN (WLAN) campus and branch network switching business. This includes all of that unit’s assets, intellectual property, research and development employees, and customer relationships “to a DOJ-approved buyer within 180 days,” the DOJ noted.

HPE is also required to license Juniper’s AI Ops for Mist source code. This will be done via an auction process with the license to be “perpetual, non-exclusive, and include optional transitional support and personnel transfers to facilitate competition,” the DOJ added.

HPE CEO Antonio Neri touted the approval and highlighted the AI-leaning nature of the soon-to-be-combined entity.

“For the first time, customers will now have a modern network architecture alternative that can best support the demands of AI workloads,” Neri noted in a statement. “The combination of HPE Aruba Networking and Juniper Networks will provide customers with a comprehensive portfolio of secure, AI-native networking solutions, and accelerate HPE’s ability to grow in the AI data center, service provider, and cloud segments.”

The concessions hit at the DOJ’s stated opposition to the deal, which was concern that HPE and Juniper’s current No. 2 and No. 3 market position in the WLAN market would hurt market choice and innovation. HPE had countered that contention, claiming it was more interested in Juniper’s overall offerings.

“Contrary to the complaint’s assertion, this transaction is not about HPE acquiring a ‘WLAN company,’” HPE wrote in its initial response to the DOJ lawsuit blocking the deal. “There is not a single HPE board document or public statement to investors about the transaction supporting this assertion. While WLAN is a component of the overall transaction, it is misleading to suggest that HPE is spending roughly $14 billion to acquire Juniper for the purpose of insulating itself from WLAN competition in the United States, particularly when the WLAN solutions that are the focus of the complaint comprise only 11 percent of Juniper’s revenue. There are simpler – and significantly cheaper – alternatives for HPE to acquire a single-digit market share in the United States in WLAN if that was its primary goal.”

Instead, HPE argued that the “primary goal of this transaction is to bring together Juniper’s data center routing and switching business with HPE’s storage and compute offering, spurring increased competition and innovation across the networking segment.” HPE pointed specifically to being more competitive against market heavyweight Cisco and providing an international alternative to China-based vendor Huawei.

However, Jennifer Rie, senior litigation analyst for antitrust at Bloomberg Intelligence, told SDxCentral that she questioned HPE’s argument.

“They haven't offered to divest anything, and if this deal isn't just about acquiring Juniper’s Mist then offer to divest either Aruba or Mist. They haven't done that,” Rie said. “To me, maybe, they could get this all cleared up if they offer to divest one or the other and get this closed, but they haven’t, and so far it doesn't seem like they have a plan to. Maybe they will down the road.”

HPE’s WLAN and Mist concessions avoid litigation that was scheduled to begin July 9.

What might have been

Rie, prior to the settlement, said that the unusual aspect of the DOJ’s claim was that the consolidated market power is only anticompetitive when it’s combined with Cisco’s dominant position in the market.

Rie explained that the government uses the Herfindahl-Hirschman Index (HHI) to determine market concentration. If a proposed deal hits an HHI limit, it typically triggers a government review, which Rie noted is when a proposed deal could provide that combined entity with at least a 30 percent market share.

However, analysts had noted that a combined HPE and Juniper would control less than 30 percent of the WLAN market, which is dominated by Cisco and its control of more than 40 percent of the market.

“You have an unusual situation here where you have the HHI that trigger this presumption, but it seems like the combined shares of the two companies are actually below 30 percent and that’s why I think it’s close,” Rie said. “You have one piece in favor of the DOJ arguments against it, but one piece that suggests, well, how can a company that when combined is less than 30 percent exert enough market power that they could harm a market, especially when they’ve got this great, big competitor in Cisco. So I feel like this case, I feel like the DOJ had enough to bring the suit, because it did, based on their guidelines, trigger a presumption of harm.”