Hewlett Packard Enterprise Company

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 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 (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 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 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.