Shares in Hewlett Packard Enterprise and Juniper Networks popped Monday in the wake of a proposed settlement of a Justice Department antitrust lawsuit aimed at blocking a merger between the two companies. Wall Street analysts expect the merger to boost financial results for HPE stock.
HPE and Juniper announced a settlement late Saturday. HPE agreed to acquire Juniper for $14 billion in 2024. A trial was scheduled in July. Amid the settlement, HPE did not provide an expected closing date for the deal. A judge must approve the settlement.
As part of the settlement, HPE agreed to divest its global Instant On networking switch business for enterprise customers.
HPE Settlement Details
"The settlement hinges on HPE licensing the source code of Juniper's Mist AI Ops software that's used in Juniper's wireless products to up to two winning bidders in an auction, as well as HPE divesting from its Instant On wireless networking business," said Evercore ISI analyst Amit Daryanani in a report. "In addition, HPE will be required to facilitate the transfer of 55 Juniper employees to one of the bidding entities."
UBS analyst David Vogt in a report said the settlement deal could open the door to more competition from Arista Networks or Extreme Networks.
"As for facilitating limited access to Juniper's Mist AIOps technology post deal close, the outcome is less clear in our view," he said. "This concession could theoretically create more competition for the combined company if another vendor can effectively leverage the tech."
The DOJ in January said that the companies' proposed transaction would eliminate competition, resulting in higher prices, reduced innovation and fewer choices for companies and consumers. The DOJ case focused on market share in wireless networking equipment.
On the stock market today, HPE stock rose over 12% to 20.69. Juniper stock rose over 8% to 39.90.
HPE and Juniper compete in the wireless market versus Cisco Systems. Cisco stock edged up on Monday.
HPE makes computer servers, networking equipment and data storage systems.
HPE Stock: Juniper Deal To Boost EPS?
Deutsche Bank analyst Matt Niknam in a report said, "We expect HPE's shares to react favorably to this news, ultimately believing the transaction yields sizable cost synergies, which we believe could be meaningfully accretive to HPE's earnings and free-cash-flow per share.
HPE is expected to report fiscal third quarter results in late August. It hosts an analyst day on Oct. 15 in New York.
If the deal falls through, HPE would have been required to pay Juniper a termination fee of $815 million.
Morgan Stanley analyst Meta Marshall said in a report: ""We view the settlement as a positive catalyst for the stock, as the Juniper acquisition
has potential to be accretive and provide catalyst for multiple expansion given roughly 50% of earnings would be from networking. We expect divesting the Instant On business and licensing the source code of Mist would have little impact on the value proposition for HPE, although the closing of the Juniper acquisition is still not imminent."
Meanwhile, HPE stock holds an IBD Composite Rating of 88 out of a best possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
Follow Reinhardt Krause on X, formerly Twitter, @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
