Juniper Networks CEO Rami Rahim remains steadfast that the U.S. Department of Justice (DOJ) is wrong in blocking Hewlett Packard Enterprise’s (HPE) pending $14 billion acquisition of Juniper, a notion backed by a strongly worded rebuttal from HPE that claims the blocking of the deal will benefit rivals Cisco and Huawei.

“I think the DOJ is just wrong,” Rahim told SDxCentral in an interview following the DOJ decision. That decision was heavily based on competitive concerns in the wireless LAN market.

Rahim said that the DOJ is taking “a very narrow view of the transaction in the wireless LAN space” and concluding the deal will impede competition.

“Ultimately, even if you look at that wireless LAN space, it's a very competitive market,” Rahim said. “I've been in the industry now for 30 years, practically all of that time at Juniper. I know how competitive the various different markets that we compete in are. Wireless LAN is one of the most competitive, with eight or nine different players. Any given opportunity that emerges … it's not uncommon to see many different players that are competing for that opportunity.”

That notion was backed by several analysts that questioned the DOJ’s reasoning for blocking the proposed transaction. Siân Morgan, research director at Dell’Oro Group, in a blog post on the decision pointed to flawed DOJ analysis of the market, writing, “apparently [eight] companies with greater than [$18 million] each of WLAN revenue in a [$4 billion] North American market is too few.”

Rahim added that: “14 of 16 jurisdictions around the world quickly approved the transaction. So it really is somewhat puzzling that the DOJ has decided to take this stance.”

HPE claims Cisco will benefit from a dead deal HPE put keyboard to its puzzlement, filing a detailed response to the DOJ filing, which included a paragraph-by-paragraph response to the DOJ’s findings. This response began by questioning the wireless LAN-centric view of the DOJ’s action.

“Contrary to the complaint’s assertion, this transaction is not about HPE acquiring a ‘WLAN company,’” HPE wrote. “There is not a single HPE board document or public statement to investors about the transaction supporting this assertion. While WLAN is a component of the overall transaction, it is misleading to suggest that HPE is spending roughly $14 billion to acquire Juniper for the purpose of insulating itself from WLAN competition in the United States, particularly when the WLAN solutions that are the focus of the complaint comprise only 11% of Juniper’s revenue. 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.”

Instead, HPE argued that 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.” HPE pointed specifically to being more competitive against market heavyweight Cisco and providing an international alternative to China-based vendor Huawei.

The Cisco angle included the argument that the networking giant has controlled more than 50% of the domestic wireless LAN market over the past 10 years, compared to around half of that market share from a combined HPE and Juniper. HPE also highlighted a handful of “other credible competitors in the U.S., including Extreme, Arista, Fortinet, Ruckus, Ubiquiti, Nile, and Meter.”

Analysts have also pounced on this argument, questioning the DOJ’s view on market competition. Morgan, who had previously extoled potential benefits of the HPE-Juniper combination, pointed to flawed DOJ reasoning that lumped all three of those players into a single argument.

“The Justice Department has indicated that the merger should be blocked because Cisco, HPE, and Juniper’s WLAN market share in North America is over 70%. The logic trap here is that 50 points of that 70% share are held by Cisco,” 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 is shampoo bottle logic (‘rather, 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.”

Ron Westfall, research director at the Futurum Group, concurred, writing that, “I find it vexing that the product area which is the focus of the DOJ’s suit – … WLAN – is intensely competitive and diverse. The acquisition should prevail as I find this a most slender reed to oppose the completion of the deal.”

The DOJ’s move focused heavily on HPE and Juniper’s current positions in the overall WLAN market, noting that a consolidation of the ecosystem’s No. 2 and No. 3 vendors would hurt market choice and innovation. It added that Juniper’s standalone market innovations have forced larger rival HPE to cut pricing and invest in its own innovations.

“Indeed, just a month before the proposed acquisition was announced, front-line HPE salespeople were concerned that ‘[t]he Juniper threat [was] dire’ because in dozens of opportunities Juniper was ‘trying to unseat’ HPE,” the DOJ wrote. “Senior HPE executives shared this view; one former HPE executive reminded his team that ‘there are no rules in a street fight’ with Juniper and encouraged them to ‘kill’ Juniper when going head-to-head for sales opportunities.”

HPE in its filing did admit that those comments were part of official documents, but that they were taken out of a fuller context.

Keep checking back with SDxCentral as we continue to dig deeper into this rapidly evolving story