Hewlett Packard Enterprise (HPE) and Juniper Networks have reacted angrily after the US Department of Justice (DoJ) sued to block their proposed acquisition.

The DOJ announced on Thursday that it has “sued to block Hewlett Packard Enterprise Co.’s (HPE) proposed $14 billion acquisition of rival wireless local area network (WLAN) technology provider Juniper Networks Inc.”

The DoJ pointed out that HPE and Juniper are the “second- and third- largest providers, respectively, of enterprise-grade WLAN solutions in the United States. The complaint, filed in the Northern District of California, alleges that the proposed transaction would eliminate fierce head-to-head competition between the companies, raise prices, reduce innovation, and diminish choice for scores of American businesses and institutions, in violation of Section 7 of the Clayton Act.”

HPE Acquisition of Juniper

It was a year ago in January 2024 when Juniper’s board had agreed to be acquired in an all-cash transaction that would allow HPE to exploit Juniper’s network security and AI-enabled enterprise networking offerings.

HPE said at the time that the deal is a “highly complementary combination … enhances secure, unified, cloud and AI-native networking to drive innovation from edge to cloud to exascale.”

The acquisition was expected to double HPE’s networking business, and to provide it with “a comprehensive portfolio that presents customers and partners with a compelling new choice to drive business value”, the company said at the time.

On this side of the pond, the acquisition triggered investigations in both the United Kingdom and Europe.

The European Commission cleared the deal in early August, followed shortly after by the UK’s CMA.

DoJ lawsuit

And now a year after the acquisition was first announced, the Trump’s DoJ has decided to block the deal.

“HPE and Juniper are successful companies,” said Acting Assistant Attorney General Omeed A. Assefi of the Justice Department’s Antitrust Division. “But rather than continue to compete as rivals in the WLAN marketplace, they seek to consolidate – increasing concentration in an already concentrated market.”

“The threat this merger poses is not theoretical,” Assefi added. “Vital industries in our country — including American hospitals and small businesses — rely on wireless networks to complete their missions. This proposed merger would significantly reduce competition and weaken innovation, resulting in large segments of the American economy paying more for less from wireless technology providers.”

The DoJ also noted that WLAN technology – which includes hardware, software, and advanced artificial intelligence – is critical for the modern workplace. It said that Juniper has been a disruptive force that has grown rapidly from a minor player to among the three largest enterprise-grade WLAN suppliers in the US.

This competitive pressure has forced HPE to discount its offerings and invest in its own innovation, the DoJ noted.

According to the DoJ, HPE recognised and tracked Juniper’s growing significance and engaged in a campaign, including mandatory training for its engineers and salespeople, to “beat” Juniper when competing for contracts.

Now, HPE seeks to acquire its smaller, innovative rival, the DoJ cautioned. The proposed transaction between HPE and Juniper, if allowed to proceed, would further consolidate an already highly concentrated market – and leave US enterprises facing two companies commanding over 70 percent of the market, with just two players (the post-merger HPE and market leader Cisco Systems).

HPE/Juniper response

Both HPE and Juniper said they strongly opposed the DoJ’s decision.

“We believe the Department of Justice’s analysis of this acquisition is fundamentally flawed and we are disappointed in its decision to file a suit attempting to prohibit the closing of the transaction,” both companies stated. “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, positively change the dynamics in the networking market by enhancing competition, and strengthen the backbone of US networking infrastructure.”

“Consistent with the conclusions reached by all other major antitrust regulators who have reviewed the deal, 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,” they added. “This proposed acquisition will provide customers of all sizes with a modern, secure network built with AI and for AI to ensure a better user and operator experience, and will create more competition, not less.”

HPE and Juniper said they remain fully committed to the transaction and believe they will prevail in litigation and close the transaction.

Tech veteran

Hewlett-Packard is regarded as one of the founding companies of California’s tech homeland of Silicon Valley, after being founded in 1939 in a Palo Alto garage.

HPE itself was created in the 2015 split of Hewlett-Packard, which saw HPE concentrating on enterprise software and networking, whereas HP focused on making PCs, laptops and printers.

Since then HPE has mostly avoided making large acquisitions (after the Autonomy debacle), although it did purchase veteran supercomputer maker Cray Inc for $1.3bn back in 2019.

In December 2020 HPE announced it was leaving California and moved its headquarters to Texas.