Juniper CEO: ‘I am disappointed and somewhat puzzled’ by DOJ merger rejection

Few would have predicted the U.S. Department of Justice would move to block HPE’s proposed acquisition of Juniper Networks. When it happened late last month, the two vendors and many industry watchers were caught off guard.

“In the thirteen months since HPE announced its proposed acquisition of Juniper, the European Commission, UK Competition and Markets Authority, and eleven other antitrust authorities around the world cleared this transaction without as much as a second look,” HPE and Juniper wrote in a response to the DOJ rejection.

“It was, therefore, no surprise that after a year of in-depth investigation requiring the production of millions of documents, voluminous submissions of data and other information, and sworn testimony, HPE and Juniper—along with virtually every networking industry expert, customers, partners, competitors, and antitrust pundits—expected the DOJ to reach the same conclusion and clear the proposed transaction in short order. Indeed, there was no reason to believe that the DOJ would seek to enjoin this acquisition for a simple reason: enjoining HPE from acquiring Juniper will provide no benefit to customers, businesses, competition, or the national security interest of the United States.”

Yet on January 30, the DOJ did the unexpected and sued to block the $14 billion sale of Juniper to HPE, citing reduced competition in the wireless market.

“I am disappointed and somewhat puzzled by the position that the DOJ has taken on this deal. It’s not something that we expected. It’s not something that, I think, makes a lot of sense,” Juniper CEO Rami Rahim said to Network World.

“They’re taking such a narrow view of the total transaction, which is the wireless line segment, a relatively small part of Juniper’s business, a small part of HPE’s business. And even if you do take a look at the wireless segment, you know we’re talking about a very competitive area with eight or nine different competitors. It’s unfortunate that we’re in the situation that we’re in, but that said, that’s okay. We’re prepared to take it to court and to prove our case and ultimately, hopefully, prevail,” Rahim said. 

HPE and Juniper met with the DOJ several times to go over the purchase, but the companies had no inclination the DOJ would go the direction it did—certainly with regards to its focus on the wireless market, Rahim said.

The DOJ issued a Complaint “that ignores the reality that HPE and Juniper are two of at least ten competitors with comparable offerings and capabilities fighting to win customers every day,” the companies wrote. “A Complaint whose description of competitive dynamics in the wireless local area networking (WLAN) space is divorced from reality; and a Complaint that contradicts the conclusions reached by antitrust regulators around the world that have unconditionally cleared the transaction.”

“As part of this process, the DOJ requests large volumes of information, documents, and so forth, which we have worked very constructively with them, including meetings that I myself participated in. But no, now, at this point, we’re just preparing to go to court,” Rahim said. 

“The DOJ Complaint ignores both the extensive benefits that will result from the proposed acquisition and the nature and extent of competition in the wireless networking space,” the companies continued. “It is a Complaint that will reinforce the status quo by benefiting Cisco, which has dominated wireless networking for decades (and whose dominance was threatened by the acquisition); a Complaint that will hobble competition with Huawei—which has been repeatedly identified as a national security risk by the U.S. government—and thus damage the U.S.’s stated aim of reducing the use of Chinese technology in critical infrastructure globally,” the companies wrote in response to the court.

“If the government’s lawsuit were to succeed, the true beneficiary would not be the customers, who will lose the benefits of a combined company, but Cisco, which will continue to have the scale needed to preserve its controlling share,” the companies wrote.

Industry analysts question DOJ’s WLAN argument

Many industry watchers might have thought the higher end of the networking spectrum—say, large enterprise switches, routers, and other gear—would be a potential competitive issue for the DOJ. Concern about WLAN competition was not expected.

“Apparently, eight companies with greater than $18M each of WLAN revenue in a $4B North American market is too few,” wrote Siân Morgan, Dell’Oro Group research director, in a blog about the ruling.

“In actual fact, the WLAN market is highly fragmented, with one large elephant in the room: Cisco. By developing a highly sophisticated global channel, a comprehensive suite of high-end networking products, and by means of a relentless sequence of acquisitions, Cisco is first—by a long stretch—in four out of five of the Enterprise Network segments we track. In the fifth segment, Network Security, Cisco is number two,” Morgan wrote. 

In the wireless LAN market—the market the Justice Department decided to single out—Cisco’s market share in North America has hovered above the 50% mark for the past 10 years, without much notable change, she stated. “During that period, HPE has remained a distant number two. Juniper, by acquiring Mist in 2018 has eked out steady WLAN gains, stealing market share—not just from Cisco or HPE—but also from other WLAN vendors. Despite growth rates that are consistently higher than the market, Juniper’s North American market share for the first three quarters of 2024 has only reached 8%,” Morgan wrote. 

“Apparently, the Justice Department feels that Cisco is too big to allow HPE to acquire another WLAN vendor in order to compete with Cisco. If the courts buy into this shampoo bottle logic (“lather, rinse, repeat, lather, rinse, repeat…”), the WLAN market in North America is likely to be trapped in the status quo for several years to come,” Morgan concluded.

Still, others believe the enterprise customer may be the biggest loser should this deal be permanently blocked. 

“HPE might well be a threat to Cisco’s account control even without Juniper. They already have the Aruba line, and their strategic influence among enterprise buyers is better than Cisco’s,” wrote Tom Nolle, principal analyst at Andover Intel, in his blog post. (Nolle is also a columnist with Network World). “For decades, my involvement with enterprises has shown that data center networking drives enterprise networking, and data center technology drives data center networking. Cisco has servers (UCS), but they don’t have a significant position in the enterprise data center market. HPE does.”

“So, from all of this, it would seem that blocking the merger helps Cisco. If that’s the case, given that Cisco is the incumbent, it could also hurt competition if the DOJ succeeds,” Nolle wrote.

Juniper CEO notes company health, momentum

Juniper, Rahim noted, is performing well on its own for now.

“We are executing incredibly well as a standalone company. We have done so over the last year, and I expect that we will continue to do so through this year.”

In the company’s recently wrapped Q4 2024, Juniper grew orders more than 40% year over year. “That’s on the heels of a Q3 where we grew orders at around 60% year over year,” Rahim said. “We saw double-digit order growth in all theaters, all customer solutions, all verticals. In fact, we saw triple-digit growth in our cloud vertical driven by AI data center buildouts.”

There are two areas in the networking arena that Rahim believes make Juniper strong. The first is AI for networks—using AI to run networks better, more efficiently, and more easily for network operators, Rahim said.

“The second opportunity, which is equally important, is the networks that essentially make up the AI data center and the networks that connect AI data centers together. Our innovation engine here is remarkable. [Juniper is] the first to introduce 800-gigabit networking, both in switching and in routing, to keep up with the unprecedented traffic growth rates,” Rahim said. 

“Increasingly, it’s about building these unique capabilities that you need in the entire stack, from the hardware to the software, that essentially optimize the network for AI workloads. So, that means understanding traffic patterns, understanding where there might be congestion, and then taking proactive actions to avoid that congestion, and that’s where our AI engine technology in Marvis plays,” Rahim said. “Congestion in an AI data center is like evil, because ultimately it results in less efficient usage of your most expensive commodities, which are the GPUs. So if we can alleviate congestion, we can make sure that cloud providers, enterprises, service providers that are building these clusters are leveraging that precious investments in GPUs as efficiently and as effectively as possible.”

“Having said all that, I do believe that as strong as we are as a standalone company, we can be an even stronger company and compete with a broader solution portfolio on an international scale. That’s why I’m so excited about this opportunity.”