HPE has fired back at the US Department of Justice’s objection to its takeover of Juniper Networks, with arguments that include an assertion that blocking the deal will benefit Huawei and therefore have national security implications.
The enterprise tech giant this week filed a riposte [PDF] to the DoJ’s argument that a combined HPE/Juniper would reduce competition and lead to higher prices.
In HPE’s view, the DoJ has erred in considering the acquisition is mostly about wireless LANs and the regulator’s worries about market concentration in that field miss the point of the deal.
The filing notes that Juniper is a Wi-Fi player, but a minor one.
“There are simpler—and significantly cheaper—alternatives for HPE to acquire a single digit market share in the United States in WLAN if that was its primary goal,” the filing states.
“Rather, the primary goal of this transaction is to bring together Juniper’s data center routing and switching business with HPE’s storage and compute offering, spurring increased competition and innovation across the networking segment.”
If a combined HPE/Juniper can do that, “the transaction would enhance competition by creating a credible alternative to Cisco—and, outside of the U.S., Huawei.”
HPE wants the DoJ to consider Huawei because it has “been repeatedly identified as a national security risk by the U.S. government”, and HPE asserts Washington has a “stated aim of reducing the use of Chinese technology in critical infrastructure globally.”
The filing also talks down Juniper’s Wi-Fi wares, with HPE denying that Juniper has risen to challenge it and Cisco and HPE. The document even points out that Juniper has only won single-digit market share “in a space where there are more than eight other credible competitors.”
The real fight is over networks for AI
Analyst firm Andover Intel has weighed in on the case with a post titled “Does a DoJ Block of the HPE/Juniper Merger Really Help Cisco?”
Principal analyst Tom Nolle’s answer is “yes”. He reasons that the total addressable market for networking equipment isn’t growing fast, and that buyers seldom ditch incumbent suppliers.
However buyers are open to new suppliers when building on-prem AI infrastructure.
“Cisco’s reorg around AI is, IMHO, clearly aimed at keeping control of the one development that could create a new little enclave of network deployment. In-house AI means a cluster of GPU servers, perhaps requiring a data center network of their own.”
The analyst thinks that “Juniper’s AIops positioning has been effective against Cisco in areas where any sort of major network upgrade was proposed, and even won a few deals that displaced Cisco gear.”
As HPE sells AI servers, after acquiring Juniper it would be in a strong position to provide networks too.
“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.”
Nolle also thinks HPE’s “strategic influence among enterprise buyers is better than Cisco’s.”
“So, from all of this, it would seem that blocking the merger helps Cisco,” he wrote.
“If that’s the case, given that Cisco is the incumbent, it could also hurt competition if the DoJ succeeds.”
But even if the deal is blocked, Nolle doesn’t think Cisco will be doing cartwheels.
“The only solution for Cisco in the long run is to add to the size of the network pie, and get the largest share of the addition. Yes, HPE/Juniper might be in a better place to do that, but HPE alone, and IBM alone, and maybe even Dell and Oracle and Broadcom alone, could do that too. Networks deliver stuff, and it’s the applications that create the stuff that builds business cases.” ®
