Hewlett Packard Enterprise sells division to secure Juniper merger
- Hewlett Packard Enterprise is divesting its Instant On wireless networking division and licensing Mist AIOps technology due to the merger with Juniper.
- The merger aims to enhance HPE's competitive edge and expand its AI-driven networking capabilities after regulatory scrutiny.
- The agreement awaits final court approval and is poised to close in Q3 2025, with Juniper shareholders set to receive $40 per share.
In early 2024, Juniper Networks announced its acquisition by Hewlett Packard Enterprise (HPE) amid a challenge from the U.S. Department of Justice (DOJ). The DOJ argued that the merger would significantly reduce competition, resulting in Cisco and HPE controlling a combined 70% share of the U.S. networking hardware market. In response to these concerns, HPE is divesting its Instant On wireless networking division and granting limited access to Juniper's Mist AI source code. This concession aims to resolve the regulatory hurdles the merger faced while promoting innovation rather than restricting it. The deal is expected to close in the third quarter of 2025, pending final court approval and a 60-day public commentary phase. The acquisition is significant for HPE's strategy to expand its AI-driven networking presence and better compete against Cisco Systems. Analysts believe that the merger will lead to enhanced earnings within the first year, as synergies driven by economies of scale and the integration of Juniper's AI-driven networking tools with HPE's Aruba Networking division are anticipated. However, this consolidation of vendors may also limit options for enterprise clients. As the merger progresses, Juniper shareholders will receive $40 in cash for each share, aligning its stock price closely with this value. Investors in both companies are now focusing on the successful integration of operations and maximizing potential synergies. HPE's valuation remains low compared to industry standards, highlighting ongoing concerns about its profitability, with thin operating margins and poor cash efficiency reflected in its price-to-free cash flow ratio of 252.7. With the DOJ hurdles transferred to court approval and the execution of divestitures underway, stakeholders are monitoring the situation carefully. If the merger succeeds, it is expected to deepen HPE's product offerings while raising the stakes for competitors taking advantage of the partial unbundling of Mist AI technology.