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Page 1 of 11 COMPETITION COMMISSION OF INDIA Combination Registration No. C-2024/05/1153 14th August 2024 Notice under Section 6(2) of the Competition Act, 2002 given by Hewlett Packard Enterprise Company CORAM: Ms. Ravneet Kaur Chairperson Mr. Anil Agrawal Member Ms. Sweta Kakkad Member Mr. Deepak Anurag Member Order under Section 31(1) of the Competition Act, 2002 1. On 22nd May 2024, the Competition Commission of India (Commission) received a Notice under Section 6(2) of the Competition Act, 2002 (Act), given by Hewlett Packard Enterprise Company (HPE/Acquirer). 2. The proposed combination involves acquisition by HPE of 100% of the outstanding shares of, and sole control over, Juniper Networks, Inc. (Juniper/Target) (Proposed Combination) (hereinafter HPE and Juniper are collectively referred to as the ‘Parties’). As submitted, the Proposed Combination is to be carried out by way of a reverse triangular merger through which Jasmine Acquisition Sub, Inc. (Merger Sub) (which is currently a Combination Registration No. C-2024/05/1153 Page 2 of 11 wholly owned subsidiary of HPE) will merge with and into Juniper, such that Juniper will be the surviving entity and will become a wholly owned subsidiary of HPE. 3. The Notice was filed with the Commission pursuant to execution of the Agreement and Plan of Merger dated 9th January 2024 by and between HPE, Juniper and Merger Sub (Merger Agreement). 4. In terms of Regulation 14(3) of the Competition Commission of India (Procedure in regard to the transaction of business related to combinations) Regulations, 2011 (Combination Regulations), vide letter dated 4th June 2024 (RFI), certain information and clarifications were sought from HPE. HPE submitted its response on 28th June 2024 after seeking extension of time (Response 1). As the Response 1 was found to be incomplete, another letter was issued to the Acquirer, on 10th July 2024, in continuation of RFI, seeking requisite information and clarifications. The Acquirer submitted its response to the same on 31st July 2024 after seeking extension of time (Response 2) (Response 1 and Response 2 collectively constitute ‘Response to RFI’). The Response to RFI was also followed by additional voluntary submissions by HPE on 2nd August 2024, 4th August 2024 and 7th August 2024 (collectively, ‘Voluntary Submissions’). 5. HPE is the ultimate parent/controlling entity of the Hewlett Packard Enterprise group. HPE specializes in business IT, offering infrastructure products to support the IT systems of customers, related software to automate and simplify IT operations, and cloud solutions as a service. The key products/services sold by HPE worldwide can be classified broadly as networking products and non-networking products. Networking products include various product segments and sub-segments viz., switches (including campus switches and data center switches (DC Switches)), wireless local area network (WLAN) equipment (including wireless access points (WAPs) for enterprise customers i.e., enterprise WAPs and WLAN controllers), software-defined wide area networking products (SD-WAN), enterprise network security solutions (ENS) (including security service edge (SSE) solutions and network access control (NAC) solutions) and secure access service edge Combination Registration No. C-2024/05/1153 Page 3 of 11 (SASE) solutions. Non-networking products include various product segments and sub- segments viz., high performance computing (HPC) and AI, storage systems, servers etc. 6. Juniper is the ultimate parent/controlling entity of the Juniper Networks group. Juniper is a networking technology company which provides networking, infrastructure, security and other related solutions (hardware and software) to customers in multiple industries. The networking products offered by Juniper worldwide include various product segments and sub-segments viz., switches (including campus switches and DC Switches), WLAN equipment (enterprise WAPs), SD-WAN, routers, ENS solutions (including SSE solutions, NAC solutions and firewall solutions), SASE solutions, and cloud (data center) networking software. 7. Given the presence of the Parties in India, the Proposed Combination results in horizontal overlaps in the broader area of networking products/infrastructure and in the narrower segments/sub-segments of campus switches, DC switches, enterprise WAPs and SD- WAN. Further, the Proposed Combination allows HPE to enhance the scope of its networking business with a more comprehensive solution and expand its addressable market with Juniper’s global portfolio of products, specifically, cloud networking software, firewalls, and routers. The Commission, accordingly, considered it appropriate to assess the impact of the Proposed Combination for the aforesaid horizontal overlaps and conglomerate effects, if any, resulting from enhancement of the scope of networking business. Assessment of Horizontal Overlaps 8. Network infrastructure, which can be used to form either wired or wireless networks, refers to the hardware and software that enables network connectivity and communication between, inter alia, users, devices, applications, and the internet. Network infrastructure hardware includes components such as switches, routers and other equipment that transport data packets between physical devices, providing the functionality necessary for connecting to a physical infrastructure. Further, these components enable and secure Combination Registration No. C-2024/05/1153 Page 4 of 11 connectivity, as well as efficient network operations, in the IT infrastructure in various industries. Network infrastructure software are software solutions such as firewalls and network management software which are used to manage and secure the network. 9. Each networking infrastructure component is distinct in terms of characteristics, functionality and performance. Accordingly, for the purpose of competition assessment, the overlaps can be narrowed down to the product segment/sub-segment level as an initial frame of reference. At product segment/sub-segment level, the activities of the Parties exhibit horizontal overlaps in four segments/sub-segments in India viz., campus switches, DC switches, enterprise WAPs and SD-WAN. The Commission also considered possibility of further segmentation of each product segment in terms of differentiate features/price ranges, wherever required. However, as the Proposed Combination is not likely to cause appreciable adverse effect on competition (AAEC) in any of the plausible markets/segments that can be delineated for the reasons detailed hereunder, the Commission decided that the question of exact delineation of relevant market can be left open for all the product segments. Campus switches 10. Campus switches are hardware devices with associated software and are generally used for network connectivity within a given enterprise facility LAN (e.g., campuses, office buildings, small enterprises, small business parks, as well as educational and medical institutions). They serve as the central hub for data transfer within the LAN, enabling seamless communication with devices at the access edge (such as computers, servers, printers, access points and other network-enabled devices). These switches utilise advanced switching technologies to ensure efficient data transmission and network management, offering high-performance Wi-Fi aggregation and delivering uninterrupted 24x7 network availability. 11. The Commission considered the estimates of market shares as provided by the Acquirer and observed that the market for campus switches is concentrated with top three players Combination Registration No. C-2024/05/1153 Page 5 of 11 accounting for more than 70 percent of the market share in terms of revenues over the period from 2020 to 20231. In terms of market shares for the period 2022-23, market is led by Cisco which is estimated to have market share in the range of [60-65] percent followed by HPE and Juniper with market shares in the range of [15-20] and [0-5] percent respectively. The Proposed Combination will result in combined market shares of [15-20] percent with an increment of [0-5] percent. The Commission observed that the change in concentration levels is moderate and considering the presence of Cisco as a significant competitor, HPE will continue to be constrained by Cisco, post the Proposed Combination, in the market for campus switches in India. However, the Commission observed that the market share estimates submitted by HPE for this segment indicated significant differences in terms of volume and value (revenue share estimates). Accordingly, the Commission explored the plausibility of segmenting the campus switches market further in terms of functionality and/or price points. Considering the same and further considering the structure of the market and positioning of Cisco, HPE and Juniper as top three players in the market, the Commission assessed the Proposed Combination further. 12. In this regard, HPE submitted that there is an element of product differentiation in terms of the different combinations of features offered, however, it was further stated that the same cannot be sufficiently segmented by a single feature. It was submitted that it may be possible to distinguish campus switches according to customer size i.e., small and medium sized businesses (SMBs) and enterprise customers given that large customers generally require greater levels of functionality in their campus switches as compared to SMBs. Larger customers may prefer managed switches, which are fully configurable and customizable, and provide a range of data on performance. In this regard, it was clarified the Parties’ activities overlap in relation to enterprise campus switches only as Juniper does not target to sell to SMBs and that the aforesaid market share estimates for India cover only the enterprise campus switches. 1 The data of market share estimates for 2023 considers the period Q4 of 2022 to Q3 of 2023. The same approach for computation of market shares has been followed for all product segments/sub-segments, unless specified. Combination Registration No. C-2024/05/1153 Page 6 of 11 13. Further, considering the fact that the Parties occupied second and third positions in the market, the Proposed Combination was also examined for elimination of close competitor. HPE was asked to substantiate on the competition dynamics and HPE citing their win/loss data on a worldwide basis submitted that Cisco (instead of the other party) is the much closer competitor to each party. Based on the data submitted, the Commission observed that Cisco is identified as the largest primary competitor to HPE for campus switches for both FY 2023 and FY 2022 with Juniper being far behind. Juniper’s win/loss data also mirrored the same trend. 14. Based on the aforesaid, the Commission observed that the impact in terms of concentration is at worst moderate. The resulting entity is likely to be constrained by other competitors, primarily Cisco. Further, the same when seen together with HPE submissions on closeness of competition, imply lack of likelihood of AAEC in any segment/sub- segment of campus switches. DC switches 15. A DC switch is a multi-port network bridge designed to build a network connection in a data center that allows receiving, processing and routing of data from one destination to another. DC switches are deployed in large data center environments for server access, aggregation and core network e.g., in large enterprises and cloud service providers. As such, DC switches must have the capacity for high-speed data transmission and low latency to ensure high-performance computing and big data processing. 16. The Commission observed that the presence of HPE and Juniper in the market for DC switches in India is insignificant as reflected in their market shares for the period 2020- 2023. The market shares of both HPE and Juniper are estimated to be in the range of [0- 5] percent with combined market share estimated to be in the range of [5-10] percent. The market is characterised with presence of significant competitors such as Cisco, Arista and Dell with their respective market shares ranging from [45-50] percent, [5-15] percent and [0-5] percent for 2023. Combination Registration No. C-2024/05/1153 Page 7 of 11 17. Considering the aforesaid presence of the Parties and market being characterised by competitors like Cisco, Arista and Dell, the Proposed Combination is not likely to cause AAEC in India in this segment. SD-WAN 18. An SD-WAN serves the same basic function as a router i.e., connecting LANs together to create a wide area network (WAN). As stated, it is a new approach to manage and optimize and control the flow of data over WAN. SD-WAN can combine multiple links, including traditional multiprotocol label switching (MPLS), but also broadband internet and 5G, delivering higher network bandwidth and performance. Whilst traditional routing relies on static configurations and limited transport choices, SD-WAN solutions can instead enhance performance by (i) keeping track of and analyzing the available WAN connections; (ii) adjusting traffic routing accordingly by determining the best routing path based on previously established policies; and (iii) utilizing encryption and other security techniques. 19. The Commission considered the estimates of market shares as provided by the Acquirer and observed that the market shares of HPE and Juniper are estimated to be in the range of [10-15] percent and [0-5] percent with combined market share estimated to be in the range of [15-20] percent. HPE submitted that market share information for competitors in India is not available and instead submitted information at the Asia Pacific level (excluding China). It was submitted that the same is a good proxy for the India competition landscape as well. As per the same, Juniper has an insignificant presence in the segment of SD-WAN while HPE has a share of less than 5% for 2023. The market is led by Cisco [45-50] percent, Versa and VMWare with each having share of [10-15] percent and Fortinet and Palo Alto with each having share of [0-5] percent each. Combination Registration No. C-2024/05/1153 Page 8 of 11 20. Considering the aforesaid presence of the Parties and market being characterised by competitors like Cisco, Versa, and VMW among others alone, the Proposed Combination is not likely to cause AAEC in India in this segment. Enterprise WAPs 21. LAN infrastructure is made up of switches and (as applicable) WLAN equipment that enable devices to connect to each other and to other LANs. WLAN equipment includes, inter alia, Enterprise WAPs, which are a networking device that allows wireless-capable devices such as computers, smartphones, etc. to connect to a wired network using wireless technology (such as Wi-Fi). 22. The Commission observed that the market for Enterprise WAPs is concentrated with top three players accounting for [75-80] percent of the market share in terms of revenues. Market is led by HPE which is estimated to have market share in the range of [25-40] percent during for the period 2020-2023 followed by Cisco and CommScope with market shares in the range of [30-35] and [5-10] percent respectively. Juniper has a market share in the range of [0-5] percent. The Proposed Combination will result in combined market shares of [40-45] percent with an increment of [0-5] percent. Considering the structure of the market and positioning of HPE as the largest player, the Commission assessed the Proposed Combination further. 23. The Commission observed that the market share estimates submitted by HPE for this segment indicated significant differences in terms of volume and value (revenue share estimates). Accordingly, the Commission explored the plausibility of segmenting the Enterprise WAPs market further in terms of functionality and/or price points. In this regard, HPE submitted that WAPs may contain differentiating factors based on their functionality, place of deployment, features (such as Wi-Fi standards or spectrum bandwidth) and / or management technology. HPE further brought forward the plausible sub-categories of the broader enterprise WAPs as considered in various industry reports viz., outdoor WAPs and indoor WAPs. It was submitted that there is no meaningful Combination Registration No. C-2024/05/1153 Page 9 of 11 operational difference between indoor and outdoor WAPs, including in terms of how they are managed and upgraded, how customers connect to them, and how they associate with other devices and that the Parties do not consider that such difference is relevant for the competition assessment. It was further added that the difference between indoor and outdoor WAPs is simply that outdoor WAPs are housed in such a way as to support a wider range of environments than indoor WAPs, including low and high temperatures, humidity / rain, shock or vibrations. In fact, the so-called outdoor WAPs are often also deployed in indoor environments, e.g., in manufacturing facilities, refrigerated warehouses or on trains and ships while the technology is the same. 24. The Commission noted the submissions of HPE and further considered the market dynamics in the sub-segments of outdoor and indoor WAPs and observed that the classification does not materially change the assessment and position observed in the overall enterprise WAPs market. 25. HPE was asked to substantiate on the competition dynamics between HPE and Juniper and HPE citing their win/loss data on a worldwide basis submitted that Cisco (instead of the other party) is the much closer competitor to each party. Based on the data submitted, the Commission observed that Cisco is identified as the largest primary competitor to HPE for Enterprise WAPs for both FY 2023 and FY 2022 with Juniper being far behind. Juniper’s win/loss data also mirrored the same trend. 26. Accordingly, with or without further segmentation of enterprise WAPs, given the insignificant increment in terms of market shares, moderate change in level of concentration, lack of elimination of a close competitor and presence of other competitors, the Proposed Combination is not likely to result in AAEC in India in this segment. Conglomerate Effects – Entrenched Networking Infrastructure Presence of HPE 27. The Commission observed that post the Proposed Combination, HPE’s portfolio of products would expand by way of addition of 3 new products, i.e., (a) routers; (b) firewall solutions; and (c) cloud networking software (which will be brought in by Juniper). The Combination Registration No. C-2024/05/1153 Page 10 of 11 Commission observed that the ability/incentive of HPE rooted in its expanded portfolio needs to be examined for any possibility of causing entry barriers etc. for the competitors. 28. In this regard, HPE submitted that the Proposed Combination will only make it a more effective competitor against Cisco in each of the markets where they compete globally. As submitted, such expansion of product offerings is not likely to result in any hypothetical bundling or tying strategy given the customer preferences and purchasing practices considering different product lifecycles for switches, WLAN equipment (including enterprise WAPs), SD-WAN and other products. As submitted, customers do not purchase all products in one negotiation, and customers often multi-source products in order to spread risk, meet their specific needs and preferences and / or increase their leverage. 29. Further submissions were made in terms of presence of Juniper globally in the segments where the combined entity will gain presence following the Proposed Combination i.e., segments of routers, firewalls and cloud software. As submitted, Juniper has a market share of less than 10 percent for routers, and less than 5 percent for firewalls and cloud networking software2. Further, each of these segments is characterized by presence of significant competitors. Also, there are no product categories or customer segments where HPE and Juniper are the top choice or the only two choices for customers, nor where the Combined Entity and Cisco will be the only choices for customers post the Proposed Combination. 30. Thus, from the aforesaid, it is observed that the Proposed Combination is not likely to cause a change in market dynamics in a manner to afford the ability or incentivize the resulting entity to engage in foreclosure strategies in the overall networking products segment or any of its sub-segments. 31. Considering the material on record including the details provided in the Notice and the assessment of the Proposed Combination based on the factors stated in Section 20(4) of 2 Based on market share estimates of Asia Pacific (excluding China) Combination Registration No. C-2024/05/1153 Page 11 of 11 the Act, the Commission is of the opinion that the Proposed Combination is not likely to have AAEC in India. Therefore, the Commission approves the Proposed Combination under Section 31(1) of the Act. 32. This order shall stand revoked if, at any time, the information provided by the Acquirer is found to be incorrect. 33. The information provided by the Acquirer shall be treated as confidential in terms of and subject to provisions of Section 57 of the Act. 34. The Secretary is directed to communicate to the Acquirer accordingly.