HPE has hit out at the US Department of Justice (DOJ) over its attempt to block the acquisition of Juniper Networks, suggesting the move is “divorced from reality” and will benefit competitors in the space.
HPE bid $14 billion for Juniper Networks in January 2024, with the deal seen as a play by the networking giant to take advantage of the AI boom. With an eye to market consolidation, European and UK regulators examined the deal, but the acquisition was approved in August.
Despite gaining clearance in European markets, the DOJ lodged a legal challenge to block the acquisition, specifically highlighting the WLAN supply market and arguing that cutting competition will harm innovation.
The legal challenge claimed that by cutting three major players to two - these being HPE, Juniper, and Cisco - the deal will limit options for customers and ultimately lead to higher prices.
At the time, HPE and Juniper released statements disputing the DoJ claims, suggesting the WLAN market was more robust than the lawsuit argued.
Now, in a document filed in response to the DoJ lawsuit, HPE said its tie up with Juniper would give customers a "credible alternative to Cisco", the networking giant that dominates the sector.
Beyond Cisco, HPE points out that Chinese networking giant Huawei is considered a security risk by the US government, so it's in need of other options for infrastructure to resist the use of Chinese technology globally.
The filing says the suit from the DoJ will "will hobble competition with Huawei — which has been repeatedly identified as a national security risk by the U.S. government — and thus damage the US’ stated aim of reducing the use of Chinese technology in critical infrastructure globally."
Why WLAN?
The HPE filing noted that HPE and Juniper are two of ten companies that battle it out in the WLAN space, saying the DOJ description of HPE's dominance in the space is "divorced from reality".
“This is a deal that enhances competition and creates a real challenger to Cisco's dominance,” HPE added.
Indeed, it accuses the original complaint of cherry picking data by describing HPE, Juniper, and Cisco as having 70% share of that market. However, HPE said the DOJ is "conspicuously silent" about the respective market shares, as Cisco holds more than half of the WLAN market and has done so for more than a decade.
HPE added that the regulator is mistaken in its focus on WLAN, explaining that the real motivation behind the acquisition of Juniper is combining its data center routing tools with HPE's storage and compute.
"While WLAN is a component of the overall transaction, it is misleading to suggest that HPE is spending roughly $14 billion to acquire Juniper for the purpose of insulating itself from WLAN competition in the United States, particularly when the WLAN solutions that are the focus of the Complaint comprise only 11% of Juniper’s revenue," the filing noted.
"There are simpler — and significantly cheaper — alternatives for HPE to acquire a single digit market share in the United States in WLAN if that was its primary goal."
In its own defense, HPE's filing quoted a LinkedIn post by industry analyst Shamus McGillicuddy of Enterprise Management Associates.
"The DOJ complaint ignores all other aspects of this deal, including data center switching, routing, firewalls, SD-WAN, network automation. It doesn’t even mention Junos, which execs from both companies call ‘the crown jewel’ of Juniper. The press release calls Juniper a ‘wireless LAN vendor.’ Hilarious."
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