Investing.com -- Shares of Juniper Networks (NYSE: NYSE:JNPR) fell 3%, and HPE (NYSE: HPE) saw a 2% decline after the Department of Justice (DOJ) filed a lawsuit aiming to prevent the companies' planned merger, citing concerns over reduced competition in the enterprise wireless equipment market.
The lawsuit asserts that the proposed merger, which would reduce the number of significant competitors from three to two, could potentially harm the competitive landscape that currently includes HPE, Juniper, and Cisco Systems Inc (NASDAQ:CSCO). This move by the DOJ was not entirely unforeseen, as the market had been anticipating potential regulatory scrutiny over the deal.
The merger was touted as a means to accelerate HPE's shift towards higher-growth solutions and fortify its high-margin networking business, promising to be accretive to non-GAAP earnings per share (EPS) and free cash flow in the first year after closing.
The acquisition was expected to double HPE's networking business, positioning the company as a new leader in the sector with a comprehensive portfolio designed to meet the demands of AI and hybrid cloud-driven business. The combined entity aimed to capitalize on the growing demand for secure, unified technology solutions that facilitate data connectivity from edge to cloud.
The DOJ's intervention has cast uncertainty on the merger's completion. The transaction was initially expected to close in late 2024 or early 2025.
The market's reaction to the DOJ's lawsuit reflects concerns over the potential impact on both companies' strategic growth plans and the broader networking sector. As the legal proceedings unfold, investors and industry observers will be closely monitoring the implications for HPE and Juniper Networks' future operations and competitive positioning.
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