‘Shocked’ Partners: DOJ Lawsuit To Block HPE-Juniper Deal Boosts Cisco
'This lawsuit is totally baffling to me. How many acquisitions has Cisco made in the last 20 years to continue its market dominance? I’m shocked,' says one solution provider in response to the DOJ suing to block the $14 billion HPE-Juniper Networks merger.
The U.S. Department of Justice’s lawsuit to block Hewlett Packard Enterprise’s deal to acquire Juniper Networks is a nod to the networking status quo that boosts market leader Cisco and “weakens” competition in the networking market, partners told CRN.
The Justice Department claims that the megadeal between the two networking companies will “reduce competition and weaken innovation.” Meanwhile, HPE and Juniper Networks on Thursday fired back at the Department of Justice, calling the lawsuit "fundamentally flawed” and pledged to do battle in the courts to complete the deal.
"They got this one wrong. If anything, this weakens competition," said an executive for a large solution provider organization that partners with both Cisco and HPE that spoke under the condition of anonymity.
The resulting product platform that would come from a combined HPE-Juniper would indeed strengthen innovation and competition, the executive said.
"I don’t see the merger as limiting choice," the executive said. "There are many more players [such as] Fortinet, Arista, Nile, Meter and Extreme Networks."
The networking industry has been anticipating the megadeal, first announced in January 2024, to close any day. HPE said last year that the deal should close by the end of calendar year 2024 or beginning of calendar year 2025.
"I’m pretty shocked. The financial analysts I have talked to recently expected the incoming administration would be very favorable to M&A," the partner executive said. "My first thought was this must be a holdover from outgoing DOJ leadership, so I was shocked this assistant attorney general was appointed just recently by the new administration."
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Patrick Shelley, chief technology officer (CTO) at PKA Technologies, a Montvale, N.J. solution provider, said he believes HPE’s acquisition of Juniper Networks would increase competition in the networking space that’s dominated by market heavyweight Cisco.
“The DOJ missed the boat here,” he said. “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. I believe the HPE-Juniper deal would actually have created more competition in the networking market.”
Shelley said he believes the deal would result in Cisco focusing more on innovating in its core networking business, especially given its stepped up focus on the security market with its $28 billion acquisition of Splunk.
In fact, Shelley said he sees Cisco’s bread and butter networking customers as the most negatively impacted if the HPE-Juniper deal is not completed.
“A lot of the Cisco customers feel Cisco has not been innovative with regard to its networking portfolio,” said Shelley. “They see it as the same old, same old and were looking at HPE Juniper as a much-needed shot in the arm to get Cisco to be more innovative in networking.”
Cisco did not respond to CRN’s request for comment by publication time.
HPE-Juniper Deal In Limbo
Partners said Cisco has had a dominant market share position in the overall networking market for three decades. The DOJ in its lawsuit focused on the WLAN market, claiming that the proposed transaction, if allowed to proceed, would result in a post-merger HPE-Juniper and Cisco commanding over 70 percent of the market.
HPE, in a response to the DOJ lawsuit, did not single out Cisco but claimed that the “allegations ignore well capitalized competitors in the U.S. – several of which hold market share comparable to Juniper and one which holds more than 50 percent market share.”
HPE CEO Antonio Neri, for his part, has said that the combined HPE-Juniper business market share would be below 20 percent in a total addressable market opportunity that goes from $35 billion to $40 billion to $135 billion. “So we more than triple the addressable market and the combined business is still below 20 percent market share which means the runway is pretty significant,” he told Barclays Global Technology Conference attendees in December.
Even with the addition of Juniper Networks, Cisco’s networking business is nearly three times the size of the HPE-Juniper combination.
For its 2024 fiscal year, Cisco’s networking segment, which includes its core switching and routing businesses, posted revenues of $29.23 billion, a 15 percent decline compared to FY 2023. HPE’s Intelligent Edge revenue, which includes its Aruba business, sales were $4.53 billion for the company's 2024 fiscal year, which was down from $5.38 from the prior-year period. Juniper Networks, meanwhile, posted fiscal year 2023 sales of $5.56 billion up five percent from $5.30 billion in Fiscal year 2022.
Solution providers said that should the lawsuit stick, it won’t be good news for HPE.
“This will hurt HPE more than it hurts Juniper, especially innovation-wise,” the partner executive said.
Another solution provider that partners closely with both HPE and Cisco said that he didn’t believe the deal would dilute competition or weaken innovation, as alleged by the DOJ.
“I think there’s more to this and more going on, because every report I’ve seen says there’s still a really big gap between HPE and Cisco,” the partner said.
“Cisco must be chuckling right now,” said the CEO of a major networking solution provider that works with HPE, Juniper Networks, and Cisco. “This lawsuit is totally baffling to me. How many acquisitions has Cisco made in the last 20 years to continue its market dominance? I’m shocked. Cisco has been the dominant player in this market for three decades. If this holds it weakens competition against Cisco and will result in less innovation in the networking market.”
The CEO said the lawsuit boosts Cisco’s networking market stronghold and “staves off” what would have been a “formidable” competitor to Cisco. “This is a great moment for Cisco,” he said.
The CEO said he sees the cloud-managed Meraki wireless networking solution as much more robust and innovative than the HPE Aruba or Juniper Networks offerings. “Meraki is almost a self-deploying kind of network, it is pretty easy to run,” he said. “It is a very good product that is not over-the-top expensive. Meraki was one of the best acquisitions that Cisco has made in its history.”
Cisco acquired Meraki in December 2012 for $1.2 billion.
The DOJ lawsuit is sure to give HPE and Juniper Networks customers “cause to pause” any potential HPE or Juniper purchases, said the CEO.
“This was built up as a big deal that would change the network market,” he said. “The question for customers now is where do HPE and Juniper go from here?”
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