Pushback Against US DOJ’s Decision to Block HPE’s Acquisition of Juniper

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The US Justice Department has filed a lawsuit to block HPE’s acquisition of Juniper because it feels that the Wireless LAN (WLAN) equipment market is too concentrated. They argue that eight companies with WLAN revenue greater than USD18 million each in a USD4 billion North American market is too few.

In actual fact, the WLAN market is highly fragmented, with one large elephant in the room: Cisco, says Dell’Oro Group Research Director Siân Morgan. By developing a highly sophisticated global channel, a comprehensive suite of high-end networking products anda relentless sequence of acquisitions, Cisco is first, by a long stretch, in four out of five of the Enterprise Network segments the Dell’Oro Group tracks. In the fifth segment, Network Security, Cisco is number two.

According to Morgan, in the Wireless LAN market, the market which the Justice Department has 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. 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%, after being in the market for over five years.

Outside North America, but excluding China, the landscape looks rather similar, with two notable exceptions. First, Juniper has made slower headway with its Mist solution, as the company spent the early years after acquiring Mist focusing in its domestic market. Second, Huawei is the number three vendor and gaining share. With the threat of Juniper Mist gaining access to HPE’s well-developed market channels outside North America, Huawei will certainly benefit from avoiding the increased competition if the Justice Department stops the HPE/Juniper acquisition in its tracks.

At over USD4 billion of annual WLAN sales worldwide, Cisco’s dominance does not come purely from product innovation. Cisco is a market leader because it dominates the ecosystem, it has the broadest channel to market, and the largest global presence. Its market share with enterprises snowballs because of its broad portfolio: campus and data center switching, WLAN, branch routing and network security.

Across the total enterprise networking market Cisco has a 34% share, while HPE combined with Juniper has 8%. Morgan says that by focusing on WLAN, the Justice Department has missed the forest for the trees. In ten years, no company has managed to challenge Cisco’s position as leader of the enterprise networking market. If networking vendors are constrained to organic growth, becoming a legitimate challenger to Cisco is likely to take decades.

“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%,” Said Morgan. “The logic trap here is that 50 points of that 70% share are held by Cisco. 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 (“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,” added Morgan. “Outside North America, vendors will just have more time to prepare for Juniper Mist’s market expansion.”

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