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The US Department of Justice (DoJ) has started a legal process to block Hewlett Packard Enterprise (HPE)’s $14bn planned acquisition of Juniper Networks, arguing that the deal would negatively impact competition in the US enterprise-grade wireless LAN (WLAN) technology sector.
“HPE and Juniper are the second- and third- largest providers, respectively, of enterprise-grade WLAN solutions in the United States,” noted the DoJ in this announcement. “The proposed transaction would eliminate fierce head-to-head competition between the companies, raise prices, reduce innovation, and diminish choice for scores of American businesses and institutions, in violation of Section 7 of the Clayton Act.”
Acting assistant attorney general Omeed A. Assefi of the Justice Department’s Antitrust Division stated: “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. 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 claims that HPE had recognised Juniper as a growing competitive threat in the enterprise-grade WLAN market and is now seeking to take out that rival by acquiring it. “The proposed transaction between HPE and Juniper, if allowed to proceed, would further consolidate an already highly concentrated market and leave US enterprises facing two companies commanding over 70% of the market,” referring to a combined HPE/Juniper and market leader Cisco.
As you’d expect, HPE and Juniper, which received clearance from the European Commission (EC) for the deal in August last year, are apoplectic at the DoJ’s decision.
“We believe the Department of Justice’s analysis of this acquisition is fundamentally flawed and we are disappointed in its decision to file a suit attempting to prohibit the closing of the transaction,” the companies noted in a joint statement.
“We will vigorously defend against the Department of Justice’s overreaching interpretation of antitrust laws and will demonstrate how this transaction will provide customers with greater innovation and choice, positively change the dynamics in the networking market by enhancing competition, and strengthen the backbone of US networking infrastructure. Consistent with the conclusions reached by all other major antitrust regulators who have reviewed the deal, this transaction brings together two complementary networking offerings and will create a networking player with the scope and scale to more effectively compete with global incumbents. This proposed acquisition will provide customers of all sizes with a modern, secure network built with AI and for AI to ensure a better user and operator experience, and will create more competition, not less,” the duo added.
Among their multiple arguments against the DoJ’s decision, HPE and Juniper noted that the “DoJ’s claim that the WLAN market is composed of three primary players is substantially disconnected from market realities. As customers shift to AI and cloud-driven business strategies for secure, unified technology solutions to protect their data, barriers to entry have decreased and expansion and competition for WLAN has intensified. As such, WLAN is an extremely competitive market with a broad set of players, all of whom are fighting for business and winning bids in competitive RFP processes. The transaction will not impede the ability of other WLAN vendors to vigorously compete,” they claimed.
Right now, though, it’s the DoJ’s announcement that impacting the market: HPE’s share price took a hit on Thursday following the announcement, losing about 2.2% of its value to end the day at $21.19, while Juniper’s stock dipped by the same percentage on Thursday to $34.38.
HPE had been hoping to complete the deal at some point in early 2025, but that isn’t going to happen now: Quite when some resolution might be reached, or what HPE and Juniper can do to get the deal back on track, is uncertain.
– Ray Le Maistre, Editorial Director, TelecomTV
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