HPE, Juniper Networks Claim If DOJ Succeeds In Blocking $14B Deal ‘True Beneficiary’ Will Be Cisco

'If the government’s lawsuit were to succeed, the true beneficiary would not be the customers, who will lose the benefits of a combined company, but Cisco, which will continue to have the scale needed to preserve its controlling share,’ says HPE and Juniper in its 21-page response to the DOJ lawsuit.

Hewlett Packard Enterprise and Juniper Networks allege that if the U.S. Department of Justice is successful in blocking HPE’s $14 billion acquisition of Juniper the “true beneficiary” will be networking market leader Cisco.

In a 21-page response to the DOJ’s lawsuit to prevent the acquisition of Juniper, HPE asserted that if the government is successful in blocking the deal it would have the “perverse effect” of further protecting Cisco as the dominant incumbent.

HPE and Juniper, in fact, argue that the DOJ complaint reinforces the “status quo” by benefiting Cisco, which has dominated wireless networking for decades.

“Contrary to the government’s assertions, the transaction actually increases competition by creating a more formidable player with the requisite breadth and scale to go toe-to-toe more effectively against Cisco for customers that want a “one-stop-shop,” said HPE in its response filed in the United States District Court, Northern District of California San Jose Division. “If the government’s lawsuit were to succeed, the true beneficiary would not be the customers, who will lose the benefits of a combined company, but Cisco, which will continue to have the scale needed to preserve its controlling share.”

HPE is asking the court to “dismiss” the case with a judgement entered in favor of HPE and Juniper against the DOJ. Furthermore, HPE is asking for the court to reimburse HPE for “costs incurred in defending” the lawsuit.

Both Cisco and the Department of Justice declined to comment.

HPE argued that the merger with Juniper Networks is “critical to promoting” competition in the networking market and alleged that the DOJ “in order to manufacture a reason to block this deal” engaged in market share sleight of hand.

“It lumps Cisco’s shares of the alleged market with the Defendants’ shares, alleging that the three have a combined market share of 'over 70 percent.' But the Complaint is conspicuously silent about the Defendants’ respective market shares,” said HPE. “This is for good reason—Cisco alone accounts for more than half of the alleged WLAN market, with Cisco’s WLAN market share in the United States consistently exceeding 50 percent over the last ten years. Meanwhile, the Defendants’ combined share of the alleged market is less than 25 percent, far below the levels at which courts have enjoined transactions under Section 7 of the Clayton Act: HPE’s share is in the 14 to 17 percent range and Juniper’s share is in the 5 to 7 percent range over the last three years.”

IDC, the global market research intelligence firm headquartered in Needham, Mass., said a combined HPE and Juniper Networks accounted for only 20.4 percent of worldwide revenue in the wireless LAN market for the first nine months of 2024 compared with 41 percent for Cisco Systems and 7.9 percent for Chinese networking company Huawei.

HPE also alleged that the DOJ relies on a “cherry-picked handful of out of context statements to suggest” competition between HPE and Juniper Networks is “particularly acute.”

In fact, HPE said, the two companies face “intense competition” in the wireless LAN market not only from Cisco but from at least seven other “credible competitors” in the US including: Extreme, Fortinet, Ruckus, Ubiquiti, Nile and Meter.

“Most of these companies already have established networking footprints with enterprise customers via other products they sell to the customers,” said HPE. “Most are well-capitalized, with the market capitalization for some of these competitors eclipsing that of both HPE and Juniper combined. All of them compete aggressively. Nearly all of these competitors have secured large U.S. customer wins in critical areas like retail, hospital or higher education—customers that the Complaint alleges rely heavily on wireless infrastructure and have complex needs and are therefore supposedly particularly harmed by this transaction.”

The HPE response to the DOJ cites four market analysts that blasted the DOJ lawsuit including Ron Westfall of The Futurum Group who argued the deal should prevail given the “intensely competitive and diverse” wireless LAN market; Jim Frey of ESG who disagreed with the lawsuit, claiming the “DOJ is not doing itself any favors”; Shamus McGillicuddy of EMA who argued the DOJ “complaint ignores all other aspects” of the deal including data center switching, routing, firewalls, SD-WAN and network automation;” and Steven Dickens of HyperFRAME who argued the DOJ’s concerns are unfounded.

In addition, the DOJ complaint refers to a CRN story, which references quotes from Patrick Shelley, CTO of PKA Technologies, a Montvale, New Jersey-based solution provider. “The DOJ missed the boat here,” said Shelley in the story. “If HPE is able to acquire Juniper Networks it would drive more innovation and force Cisco to stay up to date and current with regard to AI-enabled networking.”

In response to the HPE response to the DOJ complaint, Shelley reasserted his view that if the DOJ is successful in blocking the deal it would hurt competition and stifle innovation in the networking market.

“If the DOJ is successful, it would be bad for partners, customers and HPE and Juniper,” he said. “The only beneficiary of this lawsuit is Cisco, which is extremely dominant in the networking market. HPE is teaming with Juniper to build an AI network of the future with Juniper and could be stopped from doing so by the DOJ.”

Shelley said he finds it baffling that every regulator around the globe in 14 other jurisdictions have approved the deal but not the United States. “It makes no sense at all,” he said.

The irony of the DOJ lawsuit, said Shelley, is that some of the biggest supporters of HPE’s Juniper Networks acquisition are Cisco customers looking for a strong networking alternative.

“As much as 90 percent of our customer base uses Cisco networking and more than half were asking about the benefit of a combined HPE-Juniper networking portfolio,” he said. “Customers were very excited to see what a combined HPE-Juniper could do to compete against Cisco. Now they are being forced to reconsider their options with the DOJ lawsuit to block this deal.”

C.R. Howdyshell, CEO of Advizex, a Fulcrum IT Partners company and a top HPE and Aruba partner, also reasserted his view that the DOJ suit misses the mark given the market dominance of Cisco.

In fact, Howdyshell, who has been vocal in support of the HPE Juniper deal, said he has received plaudits from many for shining the spotlight on the benefits of the HPE-Juniper deal for customers.

In fact, Howdyshell said, he was just with a customer anxious for a Cisco alternative that was disappointed in the DOJ lawsuit against the deal. “The customer is heavily invested in Cisco and was moving down the path to consider HPE-Juniper and is now going to have to pause on that,” he said. “Customers are telling us they want a strong alternative to Cisco.”

Howdyshell said the lawsuit potentially eliminates what would have been a golden opportunity for customers to do a competitive bake-off between HPE-Juniper and Cisco looking at the pros and cons of both platforms. “The DOJ is, in effect, eliminating a competitive alternative for customers,” said Howdyshell. “At this point customers will need to look at three OEMs rather than two which could make a networking decision more complex and costly than just looking at Cisco versus HPE-Juniper.”