The U.S. Department of Justice has filed a lawsuit to block Hewlett Packard Enterprise’s deal to acquire Juniper Networks, a nod to the networking status quo that boosts market leader Cisco and “weakens” competition in the networking market.
The Justice Department claims that the megadeal between the two networking companies will “reduce competition and weaken innovation.” Meanwhile, HPE and Juniper Networks fired back at the Department of Justice, calling the lawsuit “fundamentally flawed” and pledged to fight the cause in court 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, speaking on condition of anonymity.
According to the executive, the resulting product platform that would come from a combined HPE-Juniper would indeed strengthen innovation and competition.
“I don’t see the merger as limiting choice,” the executive noted. “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. HPE had stated 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.”
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 AI enabled networking. I believe the HPE-Juniper deal would actually have created more competition in the networking market.”
Shelley added that 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 claimed 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.”
Partners noted that 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 CEO Antonio Neri 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, was $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.
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.
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 stated. “The question for customers now is where do HPE and Juniper go from here?”
