Ericsson: Every Vendor's Best Friend
Today Axerra Networks Inc., which has built a switch that migrates so-called legacy services to an IP infrastructure through circuit emulation, announced it has signed a reseller agreement with Ericsson (see Axerra Teams With Ericsson). And rumors have floated around this week that Cisco Systems Inc. (Nasdaq: CSCO) is also looking to secure an agreement with them.
So what does all this mean for Juniper Networks Inc. (Nasdaq: JNPR), which has already had a successful OEM agreement with the leading wireless and voice technology provider?
The truth of the matter is that, at the edge, Axerra directly competes with Juniper’s M5 and M10 routers. But at the core, the two products could be complementary -- and that's what Juniper would lead us to believe.
“From a core perspective, [Axerra's switch] helps groom the legacy traffic onto the IP/MPLS backbone, which works well with the M40 and M160,” says Kevin Dillon, director of product marketing for Juniper. “But they seem to be positioned as an edge router replacement. There is a degree of similarity between the platforms. But there is always some overlap in these types of agreements.”
Steve Byars, Axerra's VP for marketing, claims that his firm has not positioned its products against edge routers. Instead, he says that the AXN technology complements edge and core routers by taking legacy, circuit-based traffic and mapping it onto an IP backbone using circuit emulation. The benefit is that carriers offering T1 services or Frame Relay services can migrate that traffic onto an IP backbone.
But it's possible that Axerra and Juniper are just being careful not to step on each other's toes -- there may be more overlap than they're willing to admit. Axerra’s product functionality may also be something that can be integrated with routers.
In general, routing companies appear to be moving into more multiservice applications, anyway. Unisphere Networks Inc. (Nasdaq: UNSP) and Laurel Networks Inc. have introduced products that handle both IP and ATM traffic, and even Juniper is trying to make its routers handle more kinds of traffic through upgrades to its software. In fact, Dillon says that the Juniper routers can also emulate circuit traffic using a technology called circuit crossconnect. Thie enables Layer 2 VPNs to adapt circuit-based Frame Relay and ATM services onto an IP/MPLS backbone.
But Byars argues that this is not the same as what Axerra is doing. "Circuit emulation requires specialized hardware,” he says. "I’m not saying these other companies couldn’t do it, but it takes time. It’s not simply a matter of downloading a new software release.”
Axerra isn’t the only company looking to get in on the Ericsson OEM action. On Monday, Ariane Mahler, an equities analyst with Dresdner Kleinwort Wasserstein published a research note speculating that Cisco is trying to muscle its way into an agreement with Ericsson.
”Our industry sources have suggested that Cisco is currently approaching Ericsson with a partnership proposal, which does not surprise us from a time perspective,” says the note.
Mahler says that a reseller agreement between the two companies would benefit Cisco most in 3G mobile network deployments, a market that is expected to explode over the next few years in Europe and then the U.S. Cisco already has a relationship with Ericsson’s competitor Nokia Corp. (NYSE: NOK), but Mahler believes Ericsson’s leading market share in wireless would be enough of an incentive for Cisco to drop Nokia.
What would Ericsson get out of a deal with Cisco? One major selling point is Cisco’s strong balance sheet, which could be leveraged to help win accounts with cash-strapped 3G operators.
But Mahler believes that the hurdles will be too great for Cisco to mount. For one, she says Cisco and Ericsson would clash culturally.
“According to DKW analyst Per Lindberg, Ericsson not only dislikes Cisco but also does not trust the company to strike exclusive partnerships,” says the report.
Secondly, an exclusive partnership would also create a lot of technical issues for Cisco. Juniper and Ericsson have already come a long way in integrating their products for the wireless market. And by the time Cisco is able to get its products up to speed there would be the need for massive forklift upgrades to networks already deploying the jointly developed J20 wireless router.
”I think it is a highly unlikely thing to happen,” says Juniper's Dillon, “especially since there is considerably more product overlap between Cisco and us than with Axerra.”
Considering that Juniper generates at least 10 percent of its revenue from the Ericsson agreement each quarter, it’s no wonder others want to get a piece of the pie, too.
— Marguerite Reardon, Senior Editor, Light Reading