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Optical/IP

Analysts Dismiss Ericsson/Juniper Talk

Someone's anxious for Juniper Networks Inc. (NYSE: JNPR) to pull off a big deal. Whether that's Juniper or Wall Street, no one knows.

Either way, the Juniper deal rumors continue to fly, the latest being a theory that Ericsson AB (Nasdaq: ERIC) might pick up the router company.

The plausibility hook would be that Ericsson has been reselling Juniper gear since 2000. (See Juniper, Ericsson Enter Joint Venture.) Analysts shrugged off the suggestion, though.

"Although Juniper's IP router products would enhance Ericsson's next-generation networks and IPTV offering, our industry checks suggest such a deal is unlikely near-term," UBS AG analyst Nikos Theodosopoulos wrote in a note yesterday. He added that Ericsson management doesn't seem keen on any big acquisitions right now.

The likelihood of the deal "seems pretty small, in my opinion," says Tim Daubenspeck, an analyst with Pacific Crest Securities Inc. "The multiple you'd have to pay to buy Juniper makes it a pretty expensive acquisition for anyone." (Juniper's valuation is roughly $11 billion, compared with Ericsson's $58 billion.)

Ericsson is certainly interested in beefing up wireline assets, as demonstrated in its recent acquisition of Marconi. (See Ericsson Buys Bulk of Marconi.) But Ericsson's strategy remains unclear; it seems a bit early to make as complex a buy as Juniper, Daubenspeck says. Moreover, the deal would create all kinds of lovely conflict with Juniper's other partners, including Lucent Technologies Inc. (NYSE: LU) and Siemens AG (NYSE: SI; Frankfurt: SIE).

This won't be the last big rumor to make the rounds. Consolidation among equipment vendors hasn't happened at the same pace as consolidation among carriers, and there's a general sense among investors and executives that some two companies are likely to tie the knot soon. "Everyone's been talking to everyone for a long time," Daubenspeck says.

Juniper has been a magnet for these rumors, most of which concern Juniper acquiring an Ethernet player such as Extreme Networks Inc. (Nasdaq: EXTR), Force10 Networks Inc. , or Foundry Networks Inc. (Nasdaq: FDRY). No deal has surfaced to date, although sources say Juniper gave the idea serious consideration. (See Juniper's Extreme Thoughts Are Back and Extreme Thoughts.)

The sense on Wall Street is that Juniper needs to do something big. Its router business is steady but isn't going to lift the stock price, a problem Cisco Systems Inc. (Nasdaq: CSCO) is keenly aware of. And some have doubts about Juniper's ability to charge into the enterprise, Cisco's home turf.

Juniper officials say they're making headway in expanding the company's markets, though. The company has a 30 share of the high-end enterprise market, up from zero the previous year, according to Synergy Research Group Inc. And CEO Scott Kriens has stuck to the mantra of traffic engineering, saying Juniper's acquisitions would have to target that function within the network. (See Juniper Looks Beyond IPTV.)

— Craig Matsumoto, Senior Editor, Light Reading

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Pete Baldwin 12/5/2012 | 4:01:34 AM
re: Analysts Dismiss Ericsson/Juniper Talk A friend of mine is making his NCAA picks by flipping coins (with certain boundaries -- he has every No. 1 seed beating every No. 16 seed automatically, e.g.)

Maybe we could do something similar to pick the next merger rumor. People are itching to see something happen here -- at OFC, it got mentioned repeatedly that the vendors haven't consolidated the way the carriers have.

Someone put all the big names in a hat and draw two. I can't guarantee we'll do a story on that rumor, but we'd love to hear what you come up with.
rickaty 12/5/2012 | 4:01:33 AM
re: Analysts Dismiss Ericsson/Juniper Talk Nortel, Lucent, Ericcson, Nokia, Cisco, Juniper, Motorola, Siemens...

I like a Nokia-Alcatel combination or maybe an Ericcson-Alcatel combination. They would dominate Europe.

Lucent-Motorola is a nice combo but I think that is a real rumor that's been around for a very long time.

Why overpay for Juniper when you can just partner with them ?

I have trouble pairing Cisco with any of the big telecom vendors.
sigint 12/5/2012 | 4:01:32 AM
re: Analysts Dismiss Ericsson/Juniper Talk How about Cisco + Nortel. Wait, wait, let me explain.
________________________________

John C, answering an employee question at a Cisco forum exlaimed that this wouldn't happen as long as he was CEO.

Hard to say how much importance one should attach to an informal comment, but interesting data point, nonetheless.
ragho 12/5/2012 | 4:01:32 AM
re: Analysts Dismiss Ericsson/Juniper Talk
How about Cisco + Nortel. Wait, wait, let me explain.

Not sure of the exact date, but NT and CSCO both have acknowledged that early discussions did take place prior to the "bubble". When NT hit $100 with a cap of over 100B, John Roth (the then CEO) stated that he'd hold out for 400B and it'd still have to be a 'merger-of-equals'.

Although NT has structural problems, I value the following business units significantly:

1. 2.5G/3G Wireless
2. Optical LH/Metro
3. Enterprise Voice/VoIP
4. Carrier switching (Passport and Alteon)

Everything else is (mostly) crap at NT. And the first three are something Cisco would love to get it's hands on.

My 2 cents of course. Chambers owes me lunch for this idea. Or perhaps it was his own ;-).

-ragho
photon2 12/5/2012 | 4:01:30 AM
re: Analysts Dismiss Ericsson/Juniper Talk Ericsson now has the Marconi router...and while it's still in the early stages of customer deployments, there's no reason to dump it for Juniper. Frankly, it's the best asset that merger got out of Marconi, it's just that Ericsson doesn't know it yet. Too bad. Sigh.

photon2
seabis 12/5/2012 | 4:01:29 AM
re: Analysts Dismiss Ericsson/Juniper Talk photon2, is that the tnx or axn? sorry if i got the acronyms wrong. does marconi's router have a customer? if so, why is ericsson selling juniper?
seabis 12/5/2012 | 4:01:29 AM
re: Analysts Dismiss Ericsson/Juniper Talk no one thinks lucents megaselling of juniper routers has any relevance to this discussion?

with ims, riverstone and juniper, lucent could take on cisco. however, with junipers valuation at par with lucent, who would run the company. certainly juniper has no experience beyond routing and security. in any case, egos would never allow it to happen. too bad, since neither will survive on its own in the new telecom order.
tmc1 12/5/2012 | 4:01:29 AM
re: Analysts Dismiss Ericsson/Juniper Talk It will never happen but I would like to see a Juniper-Alcatel merger. From a product standpoint there is very little overlap and their strengths compliment each other well. They would be strong enough to resist Cisco and the oncoming Huawei onslaught and compete with the motorola/nokia/lucent type companies. I think that the culture is just too different though and Juniper is too overpriced for what they offer while Alcatel has lower product margins. It would be a serious powerhouse company though and give the ability to focus on enterprise more.
Stevery 12/5/2012 | 4:01:28 AM
re: Analysts Dismiss Ericsson/Juniper Talk
Can have a nice name too - "Luper".. (good lord, its not Luser/Lucer!)


Nah, I would vote for either "Luniper" or "Juicent". The former is probably derived from the word "lunatic". The latter is derived from the highly spiked Jamba Juice that would be required to bring the parties to the table.
litedope 12/5/2012 | 4:01:28 AM
re: Analysts Dismiss Ericsson/Juniper Talk None of speculations so far are what LR folks even want to peek. Please pay attention to the hint from the article: it is about IP TV.
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