DOJ Sues to Block HPE’s $14B Juniper Networks Acquisition

Hewlett Packard Enterprise’s (HPE) $14 million acquisition of Juniper Network, a networking products maker, is in jeopardy as the U.S. Department of Justice (DOJ) is suing to block the deal. 

DOJ argues deal would stifle competition

According to a filed complaint, the DOJ is arguing that the acquisition would stifle competition. The agency argues that the acquisition would eliminate competition and would lead HPE, along with Cisco, to control more than 70 percent of the U.S. market for networking equipment.

“Juniper has also introduced innovative tools that have materially decreased the cost of operating a wireless network for many customers,” the DOJ cites in its complaint. “This competitive pressure has forced HPE to discount its offerings and invest in its own innovation.”

In a joint statement, HPE and Juniper “strongly” opposed the DOJ’s decision to file a lawsuit to block the acquisition, and the companies “plan to vigorously defend the transaction in court.”

President and CEO of HPE, Antonio Neri, said that the two companies remain committed to the transaction and have confidence in their legal position.

“We believe the DOJ’s analysis of this acquisition is fundamentally flawed,” Neri wrote in a LinkedIn post. “It is our position that the transaction will enhance competition, not reduce it. By combining HPE and Juniper’s complementary strengths, we believe we will provide customers with greater innovation and choice. The combination also creates a compelling U.S.-based alternative to the global incumbents, fortifying the American “core tech” sector that serves as the backbone of U.S. digital infrastructure.”

The DOJ states that Juniper has developed into one of the largest enterprise-grade WLAN suppliers in the country and has introduced innovative tools that increased competitive pressure and forced HPE to discount their offerings and invest in their innovation. They also say that HPE recognized and tracked Juniper’s growth and that “front-line HPE salespeople were concerned that ‘the Juniper threat was dire’ because in dozens of opportunities Juniper was ‘trying to unseat’ HPE.” Further, the entity claims that if the acquisition were allowed to proceed, it would further consolidate a highly concentrated market– substantially lessening competition. 

“HPE and Juniper are successful companies. But rather than continue to compete as rivals in the WLAN marketplace, they seek to consolidate– increasing concentration in an already concentrated market,” said Acting Assistant Attorney General Omeed A. Assefi of the DOJ’s Antitrust Division. “The threat this merger poses is not theoretical. Vital industries in our country– including American hospitals and small businesses– rely on wireless networks to complete their missions. This proposed merger would significantly reduce competition and weaken innovation, resulting in large segments of the American economy paying more for less from wireless technology providers.”

How we got here

Last January, HPE announced that it would be acquiring Juniper in a $14 billion deal that would combine AI-driven cloud-native architecture to double its networking business. 

The integration of both companies’ portfolios was set to fortify HPE’s edge-to-cloud strategy, establishing its dominance for AI-driven cloud-native architecture, along with positioning HPE as a leader in secure, unified technology solutions that connect, protect, and analyze data from the edge to the cloud.

Further, the company said at the time that this acquisition would grow HPE’s networking segment from 18 percent to 31 percent of total revenue and contribute roughly 56 percent of HPE’s total operating income. 

Additionally, company executives anticipated that the networking segment would become a crucial foundation for HPE’s hybrid cloud and AI solutions, delivered through its GreenLake hybrid cloud platform.

Acquisitions in the channel have and will continue to play a significant role in how the industry is shaped. Read more about some of the other mergers and acquisitions in January and how they’re impacting the channel.