Justice Department sues to block HPE’s $14B Juniper acquisition – News

The U.S. Justice Department has filed suit to block Hewlett Packard Enterprise Co.’s proposed acquisition of Juniper Networks Inc. for $14 billion.

Officials submitted the complaint today to the U.S. District Court for the Northern District of California.

HPE announced plans to acquire Juniper last January. The latter company, one of the world’s top network equipment suppliers, makes switches and routers for data centers. It also competes in the WLAN market, which includes devices such as the Wi-Fi access points that companies use to provide wireless coverage at their offices. This latter segment is the focus of the Justice Department’s lawsuit.

Five years before HPE announced the proposed acquisition, Juniper purchased a WLAN supplier called Mist for $405 million. The deal bought it more than a dozen Wi-Fi access points. Juniper also obtained Mist’s namesake artificial intelligence service, which can automatically optimize wireless connectivity and identify the root cause of access point malfunctions.

Today, Juniper is among the three largest WLAN suppliers in the U.S. HPE and Cisco Systems Inc. round out the list.

In its lawsuit, the Justice Department states that the proposed acquisition would leave HPE and Cisco with a more than 70% share of the enterprise WLAN segment. Officials argue that such market consolidation would reduce competition. Reduced competition, the complaint elaborates, would increase prices for customers and hamper innovation.

“HPE and Juniper compete fiercely to win business,” the lawsuit states. “They frequently submit bids to provide enterprise-grade WLAN to the same customers, and they are often the top two bidders. Customers — particularly large enterprise customers — frequently benefited from competition between HPE and Juniper.”

The lawsuit states that competition from Juniper pushed HPE to offer discounts to customers on multiple occasions. According to the Justice Department, the two companies competed for WLAN contracts from a “large healthcare system” and a “large research university system” in 2023. HPE had offered discounts in both cases.

The Justice Department also argues that competition from Juniper led HPE to enhance its network management software. In the lawsuit, antitrust officials cite an internal HPE strategy deck from 2022. The document stated that the company should improve its software’s user experience and add more artificial intelligence features to better compete with Juniper’s Mist business.

HPE and Juniper pushed back against the lawsuit 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” the companies stated.

The acquisition received regulatory approval in the European Union and the U.K. last year. Before greenlighting the deal, the EU studied whether buying Juniper might enable HPE to raise prices in the WLAN market. Officials determined that customers have a “certain level of countervailing buyer power” which would allow them to push back against such price hikes.

When it first announced the acquisition last year, HPE predicted Juniper would double its networking business. The company also expects the deal to boost its earnings per share and free cash flow within a year of closing. 

Photo: HPE