By Claus Hetting, WiFi NOW CEO
In a statement Thursday the US Department of Justice said it is suing to block HPE’s US$14B takeover of competitor Juniper citing that the acquisition would ‘eliminate competition between two of the three top wireless networking firms, raise prices, and diminish innovation for American businesses’. HPE struck back swiftly on Friday, saying that the Department of Justice’s analysis of the takeover bid is ‘fundamentally flawed’. The acquisition was announced in January of last year.
After a year of preparations towards HPE’s expected acquisition of Juniper, the Department of Justice (DoJ) has now thrown a spanner in the works. Last week the DoJ filed an antitrust complaint against both HPE and Juniper citing violations of the Clayton Act. The indictment document itself – available here – makes for fascinating reading including detailed accounts from an intense period of competition between the two prior to HPE deciding to acquire Juniper in January of last year.
The DoJ argues 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.’ The DoJ also points out that post-merger HPE and market leader Cisco would in total command 70% enterprise WLAN market share. HPE says the DoJ’s market view is flawed.
In response HPE says the acquisition is ‘pro-competitive’ and that HPE will demonstrate ‘how this transaction will provide customers with greater innovation and choice’. HPE also says that the DoJ’s statement on the WLAN market being composed of just three players is ‘disconnected from market realities’ and that the acquisition ‘brings together two complementary network offerings’.
The DoJ has secured colourful evidence describing how HPE engaged in a fierce competitive battle against Juniper knowing that Juniper (after the acquisition of Mist Systems in 2019) had grown its WLAN market share from 1.7% to 6.5% by the end of 2021 – arguably a remarkable achievement – leading HPE to consider Juniper a major competitive threat. Mist Systems – co-founded by Wi-Fi veteran Bob Friday – was the first WLAN vendor to apply AI to drive down operational costs and introduce an AI-based natural language user interface as an important tool for day-to-day network operations.
The DoJ says HPE in 2021 created a ‘Beat Mist’ initiative using targeted marketing, competitive pricing, and product innovation. One HPE executive was ‘personally involved in five head to head street fights with Mist’ pointing out that ‘there are no rules in street fights.’ He even concluded one of his emails with the statement ‘KILL MIST!!!!’, the DoJ writes.
At this point it is anyone’s guess what might be the result of such a lawsuit or whether some form of settlement is possible. Meanwhile the WLAN industry is no doubt shaken. Depending on the outcome the case will surely impact the WLAN competitive landscape significantly in particular with regards to the innovative and increasingly business-critical use of AI for WLAN networking. In particular HPE and Juniper will no doubt be busy regrouping and re-strategising to find – at least as options – individual avenues of market attack.
/Claus.
