HPE CEO Antonio Neri Responds To DOJ Lawsuit: ‘We Believe There Is No Case Here’

Neri said he is 'super confident' HPE will prevail in a court battle, which he expects could take four to six months.

Hewlett Packard Enterprise CEO Antonio Neri Thursday said the U.S. Department of Justice lawsuit to prevent his company’s $14 billion acquisition of Juniper Networks fails to recognize national security interests and customer support for the deal.

“We believe this is flawed,” said Neri in an interview with CNBC, reacting to the DOJ lawsuit. “We believe there is no case here. When you talk to analysts they all understand it. We’re going to fight this in court.”

In fact, Neri said, he is “super confident” HPE will prevail in a court battle which he expects could take four to six months.

Neri said the DOJ lawsuit fails to recognize “national security interests,” especially given the market share of Huawei, the $100 billion Chinese networking provider.

“Obviously (this allows us) to be able to compete outside the United States with Huawei which has a large presence and market share,” he said.

The U.S. government, in fact, has restricted Huawei’s ability to compete in the United States due to national security concerns.

As far as whether he is concerned about how customers will react to the lawsuit, Neri said: “The customers are looking forward to this transaction...Ultimately they want this transaction to go through because they want an alternative to the 50 percent of the market. At the same time, they want an alternative to the Chinese situation that we see outside the United States. Remember that 60 percent of our business comes from outside the United States. When you think about an alternative to the Chinese suppliers this will be a tremendous alternative. And for the United States itself, this is in my mind a matter of also national security. We had conversations around that. We hope this will be considered as well.”

In its lawsuit, which focused heavily on the wireless LAN market, the DOJ claimed that the HPE acquisition of Juniper Networks would “eliminate fierce head-to-head competition between HPE and Juniper, “raise prices, reduce innovation, and diminish choice for scores of American businesses and institutions, in violation of Section 7 of the Clayton Act.”

The Clayton Antitrust Act of 1914 prohibits anti-competitive mergers and predatory forms of pricing.

“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 Justice Department's Antitrust Division, in a press release. “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.”

The DOJ said the proposed transaction between HPE and Juniper, if allowed to proceed, would further consolidate an already highly concentrated market—and result in U.S. businesses relying on just two companies that command over 70 percent of the WLAN market: the post-merger HPE-Juniper and the market leader Cisco.

Neri said HPE had met Tuesday with acting assistant attorney general in charge of antitrust Assefi. “We had a great chat, but ultimately they decided to file the complaint,” he said,

Neri said he is hoping once a permanent antitrust chief is approved and put in place the DOJ will look at the HPE acquisition of Juniper Networks in a new light.

President Donald Trump has nominated Gail Slater, who has worked as a regulator in the Federal Trade Commission, to head up the antitrust division.

“Obviously the administration is in transition,” said Neri. “We don’t have yet the permanent people in the antitrust division or at the DOJ level. So I hope when the new administration is in place and in charge they are going to look at this from a completely different lens and perspective. Deals like this are not big tech. This is what I call core tech. Core tech is what powers the United States government. Both Juniper and HPE support the Department of Energy, the Department of Defense, and many of the (agencies) of the United States.”

Neri said he has full confidence in the HPE legal team as it moves forward with its case.

“I’m not a lawyer, but I will tell you I have the best legal team,” he said. “You can look at the history and see all the lawsuits we have fought and we have prevailed in every single one of them. That said, we have to navigate this and put forward the enormous amount of documentation we provided throughout the process which we substantially completed last August. That is why this is a little bit surprising and disappointing. On the other hand, I am super confident that our team will prevail through the hearings and the trial.”