US Sues to Stop HPE $14 Billion Deal to Buy Juniper Networks ()

The US Justice Department sued to block Hewlett Packard Enterprise Co.’s $14 billion acquisition of Juniper Networks Inc., arguing the tie-up would harm competition in the market for enterprise wireless equipment used by large companies, universities and hospitals.

In a complaint filed Thursday in federal court in California, the US said the deal would consolidate the sector from three major players — HPE, Juniper and Cisco Systems Inc. — down to two that would control 70% of the market.

The antitrust suit marks the first brought by the Justice Department under President Donald Trump, an indication the administration may continue an aggressive stance on corporate consolidation pursued by the agency under Biden.

The proposed transaction, “if consummated, would eliminate head-to-head competition that has lowered prices and driven investment in network management software, and it would decrease pressure on HPE to discount and innovate in the future,” the Justice Department said in its complaint.

Shares of HPE and Juniper each fell 2% respectively.

In a joint statement, HPE and Juniper said the Justice Department’s analysis was “fundamentally flawed” and ignores “well capitalized competitors in the U.S.”

“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 said. “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.”

HPE and Juniper, like bigger rival Cisco, make networking devices such as routers and switches. Networking is the technology that directs the flow of information between devices and across the internet. Both companies supply gear used by businesses and other organizations to provide wireless internet access to people inside their facilities.

Rising competition from Juniper forced HPE to discount its products and develop new features in a campaign to “Beat Mist,” the name of Juniper’s competing product, the Justice Department wrote. Salespeople were trained to better compete with Juniper, and competitive intelligence about Juniper continued to be shared within HPE even after the acquisition was announced, according to the complaint.

HPE senior executives tracked Juniper’s growth in recent years, with one noting the expansion is “concerning for me,” the Justice Department wrote. In 2021, another sales leader encouraged his teams to “KILL MIST!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!”

Many large customers “believe Cisco’s products compare unfavorably to HPE’s and Juniper’s on price, features, and reliability,” the Justice Department wrote. “Those customers benefit from having Juniper as a credible alternative to Cisco and HPE in the market. If HPE successfully acquired Juniper, the acquisition would leave them with fewer credible choices.”

Since Hewlett-Packard was split into two companies in 2015, HPE has focused on business-oriented products and services such as selling high-powered computing, networking, and cloud services.

“We believe there is no case here,” HPE Chief Executive Officer Antonio Neri said Thursday in an interview underscoring the company’s decision to challenge the case in court. “The thesis is flawed,” he said, saying there are eight companies that compete in the $180 billion market, including Arista Networks Inc. and Fortinet Inc.

Read more: HPE CEO Says Company Will Defend Juniper Merger ‘Vigorously’

Executives from HPE and Juniper met with Justice Department antitrust enforcers earlier this week to discuss concerns about the deal, Bloomberg News reported.

In the EU, the deal secured unconditional approval after regulators found that it would not raise competition concerns in any of the markets examined on the bloc. The move was soon followed by a green light from the UK Competition and Markets Authority.

(Adds CEO comments in 13th paragraph.)

--With assistance from Josh Sisco and Samuel Stolton.

To contact the reporters on this story:
Leah Nylen in Washington at lnylen2@bloomberg.net;
Brody Ford in New York at bford61@bloomberg.net

To contact the editors responsible for this story:
Sara Forden at sforden@bloomberg.net

Peter Jeffrey

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