Juniper CEO Rami Rahim is Right When He Says the DoJ is Wrong

Did Juniper CEO Rami Rahim reach out to SDxCentral for an interview, or was the approach from the latter to the former? The answer to that question doesn’t negate anything that Rahim said in an article published by SDxCentral, but it would be interesting to know the answer.

HPE and Juniper probably are working in tandem to challenge and reverse the DoJ’s objections to the former’s proposed $14-billion acquisition of the latter. It really doesn’t matter. More power to them.

The fact is, Rahim makes some cogent points, many of which coincidentally serve to bolster my previous contention that clear and consistent guidelines need to be established to govern DoJ decisions on approvals of and objections to proposed acquisitions. Companies need clarity on what will or will not fly, and it shouldn’t be all that difficult to provide transparent criteria that demarcate exactly which sorts of deals will fall fair or foul on the field of play.

Rahim offers compelling argument, as have others, that competition in the WLAN market is, all things considered, relatively robust. Even a combined HPE-Juniper would leave plenty of viable WLAN alternatives to market leader Cisco Systems, which would retain a significant lead in market share over its nearest rival. It bears repeating that Cisco is the leading WLAN vendor, not HPE or Juniper, who even as a merged entity would remain a long way from toppling Cisco from the WLAN market’s top rung.

Did Cisco lobby behind the scenes to scupper HPE’s acquisition of Juniper? Theories abound, but it is impossible to know what words or favors get exchanged in the clubbable privacy of the well-connected. Even if Cisco has attempted to sink this deal, you can’t expect the company to put up its hand and admit to the offense. When machinations occur, they are executed furtively, beyond public view and earshot.

Donning our Deerstalkers

In this instance, however, even if we don our deerstalkers and employ our magnifying glasses, we will struggle to find a smoking gun that proves Cisco has conspired to prevent the consummation of HPE’s acquisition of Juniper.

Regardless of what Cisco did or didn’t do, the DoJ doesn’t have a credible argument for holding up the deal. Not that anybody in a position of power is listening to me, and not that they will listen to you (but maybe I’m wrong there), but the fact is, there are no legitimate grounds for preventing this acquisition from moving forward.

Here’s an excerpt from the SDxCentral article featuring Rahim’s rebuttal of the the DoJ objections:

“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.”
. . .
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.”

All I can say here is, welcome to our brave new world, Rami. If you’re puzzled now, just wait. We’re leaving the station of puzzlement, and the next stop is the confounding land of inexplicability.

For some of us, depending on the degree to which we truly think for ourselves, the world is becoming completely unfathomable, a place of ravening madness featuring incoherence as a proud lifestyle choice. Still, it’s quaint that Rahim is still trying to hold our unpredictable and volatile world to some sort of objective accountability. I wish I had his sunny disposition and cheery optimism.

Lap Around Digressionary Crescent

Okay, having completed my quick lap around digressionary crescent, I can now return to our discussion of the blocked transaction.

HPE claimed that the blockage of the deal by the DoJ would benefit Cisco and Huawei. Even in the fluid Dali-like surreality of the present, I can’t imagine that the DoJ has any incentive to boost Huawei’s business. A DoJ prejudice in favor of Cisco is more credible, but, as we’ve noted, unproven. In HPE’s formal objection to the DoJ blockage, the SDXCentral article notes, the following HPE protest was offered:

“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.

That text was followed by brief mention of allegedly bad behavior by an HPE sales executives. As I wrote in my previous post on this topic, I don’t understand how the characteristically histrionic showboating of salespeople factored into a DoJ finding. Salespeople will be salespeople: they live in a world of wins and losses, commissions, monotonous melodrama, and hackneyed sports cliches. There’s no comprehensible reason for the Justice Department to cite the profane comportment of sales personnel as a justification to challenge or suspend an M&A transaction.

Have you ever attended a vendor sales conference? Then you know what I mean. It’s all about getting fired up to thrash the competition. Psychic cosplaying is encouraged, action-movie cliches run free, heroic battles between good and evil (the latter being the competition) are foretold excitedly like mystic prophecies. Some salty and peppery language is used and repeated. Yet none of it (I hope) is meant to be taken seriously, and it should not have been raised as a point of objection to the proposed HPE-Juniper transaction.

DoJ Can Do Better

I chose to draw attention to this article not only because I agree with what Rami Rahim is saying, but because I think it illustrates the need for clearer parameters to govern the DoJ’s approval or rejection of proposed M&A transactions. HPE would not have pursued this deal if it thought the DoJ would deny it; and Juniper would not have accepted HPE’s offer if it knew that the process would result in months and years of existential uncertainty.

There should be a relatively uniform and unimpeachable methodology to define the qualitative and quantitative criteria that constitutes an acceptable M&A transaction. (I realize guidelines already exist, but they seem devised primarily for the benefit of the legal profession. Ambiguity runs amok). Before a deal goes down, everybody should understand what will pass muster and what won’t. To the greatest extent possible, ambiguity should be eliminated at the earliest possible stage of the process.

Having such criteria in place will also preclude the possibility that another vendor, not directly in the involved in the a transaction but a potential beneficiary of its failure, might lobby against a given deal or otherwise wield influence to color or compromise the judgment of DoJ officials. I’m not saying that any impropriety, corruption, or malfeasance has occurred in this instance, but having more rigorous policies and procedures in place would eliminate perceptions of irregularity.

We should all want that, right? There’s no point encouraging deals that won’t be approved, wasting the time and money of all involved, just as there’s no point discouraging the pursuit of deals that would be beneficial to the broader marketplace. The DoJ should be able to do better, and it should want to do better.