[Updated 3:50 PM ET] Nortel will sell Juniper routers

June 29, 2000

2 Min Read
Juniper-Nortel "Alliance" Gives Pause

[updated 3:50 PM] Juniper Networks Inc. (Nasdaq: JNPR) and Nortel Networks Inc. (NYSE: NT) today announced an alliance that the industry has been whispering about for some time.

The two companies signed a "Memorandum of Understanding" to combine their optical and core routing technologies, and Nortel will begin selling Juniper routers, according to sources from both companies.

Details about their plans to combine technology were not disclosed. It appears that, in the short term at least, the deal is a non-exclusive marketing and sales relationship that will broaden Juniper's sales channel.

"We want to show customers the products are interoperable and make sure they're managed through the same set of management tools," said Arun Jain, director of marketing for IP infrastructure at Nortel.

Juniper shares rallied on the news. Juniper is the second-largest router manufacturer after Cisco Systems Inc. Cisco Systems Inc. (Nasdaq: CSCO), and Nortel is the leading vendor of optical networking equipment. Juniper stock rose $10.25 (7.51%) to $146.69 in afternoon trading on Nasdaq.

"Juniper has demonstrated interoperability with just about everyone," said Scott Clavenna, principal analyst with Pioneer Consulting LLC (http://www.pioneer.com). "But I guess this is significant because it shows they are being a little more aggressive than Cisco. Juniper is being more forward looking because a lot of their demos are with optical vendors like Ciena an Zaffire." At least one analyst questioned a deal in which no dollar amounts or formal product combinations were announced.

"This isn't a big deal," said Gina Sockolow, analyst with Brean Murray (http://www.breanmurray.com), an investment bank. "I wonder if this is simply a reference sale agreement or whether there is any dollar amount attached."

Cisco Systems Inc. http://www.cisco.com (Nasdaq: CSCO) downplayed the alliance.

"This announcement underscores the fact that Cisco remains the only company to provide end-to-end optical and IP solutions," said Vijay Parikh, vice president and general manager of Cisco's Internet POP Systems Business Unit. "For Nortel Networks, this is its third IP strategy in less than eighteen months following earlier strategic partnerships/acquisitions with Avici and Bay."

The partnership does have implications for Nortel's own routing technology, including its Versalar high-performance routing platform and the investment it made in Avici Systems Inc. (http://www.avicisystems.com), another high-performance router startup that recently filed for an Initial Public Offering (IPO). "It's funny that Nortel has an investment in Avici and they're doing this [with Juniper] right before the Avici IPO," said Sockolow.

Nortel's Jain said the company is no longer active in marketing Avici's product. Nortel's Versalar 25000 core-routing product is still being developed, while Juniper's product is "here and now," said Jain.

--R. Scott Raynovich, Executive Editor Light Reading (http://www.lightreading.com)

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