Ethernet equipment

Is Juniper Eyeing H3C?

An acquisition rumor is dogging Juniper Networks Inc. (NYSE: JNPR) yet again, this time claiming the company wants to buy a joint venture between Huawei Technologies Co. Ltd. and 3Com Corp. (Nasdaq: COMS)

Asian news outfit Sinocast.com reported that talks are ongoing, with a preliminary purchase price of $1.7 billion.

H3C, as 3Com has taken to calling the joint venture, would boost Juniper's standing in the enterprise LAN. "This would likely allow them to go down market, and potentially not hurt the major Juniper brand depending on how they do it," writes analyst Mark Seery of Ovum RHK Inc. , in an email to Light Reading. "If you are going to be in the enterprise market at all, no point being half pregnant. Might as well go all the way."

Juniper has continued to say it's interested in the enterprise, where it offers the J-series of routers and many products from the former NetScreen Technologies, acquired for $4 billion in 2004. (See Juniper Buys NetScreen.)

But some believe Juniper's enterprise efforts can't truly take off until the company can better match the breadth of Cisco Systems Inc. (Nasdaq: CSCO). Cisco rules the switch-and-router kingdom, and its dominance prods enterprises into buying other types of equipment from the company.

Juniper acquisition rumors have flared like acne during the past year, with most theories citing Ethernet switches as the target. Repeatedly, talk has had Juniper interested in Extreme Networks Inc. (Nasdaq: EXTR), Force10 Networks Inc. , or Foundry Networks Inc. (Nasdaq: FDRY). Even carrier Ethernet vendor Atrica Inc. came up as a possibility. (See Extreme Thoughts, Juniper's Ethernet Strategy Emerging, and Juniper Shopping for Atrica?)

Could this be the one that comes true? "If you're throwing darts at the wall, maybe," says Steve Kamman, an analyst with CIBC World Markets . Better options than H3C would include established brand names like Foundry, or higher-volume plays such as the HP Inc. (NYSE: HPQ) router division, he says.

H3C contributed $145 million in revenues and $18 million in profits to 3Com's third quarter. (See 3Com Reports Q3.) Which brings up an interesting point: 3Com, which is still losing money, would seem to need H3C's help. "Profitability is our foremost focus," newly christened 3Com CEO Scott Murray told analysts on an earnings call last week. (See 3Com Names CEO.)

3Com recently took control of H3C, spending $28 million to acquire an additional 2 percent of the venture, according to SEC documents. Now holding a controlling 51 percent share of H3C, 3Com will be folding the joint venture's results into earnings announcements from now on, and Murray vaguely promised there would be further discussions with Huawei about the ownership of H3C. He told analysts 3Com and H3C should be treated "as one combined business."

Juniper declined to comment for this story.

— Craig Matsumoto, Senior Editor, Light Reading

zher 12/5/2012 | 3:59:45 AM
re: Is Juniper Eyeing H3C? H3C mainly sells Huawei's low end to mid range data network devices, and Huawei is one of the biggest competitor of Juniper, don't know how this can work.
Solomonyang 12/5/2012 | 3:59:45 AM
re: Is Juniper Eyeing H3C? Yeh, does H3C have any R&D team, or just a sales department to throw out low-price Huawei products? If this case, what's its valude to Juniper?
oemarket_com 12/5/2012 | 3:59:44 AM
re: Is Juniper Eyeing H3C? Just a wild guess, maybe Juniper does not want competition but a rather constructive cooperation with Huawei through this H3C. They can share some advantages and combine some of their products. H3C can be a good market channel, prohaps.
linbin99 12/5/2012 | 3:59:41 AM
re: Is Juniper Eyeing H3C? H3C has its own R&D and manufacture. In fact Huawei is re-selling the low-end/enterprise router and LAN switch made by H3C.
midguy 12/5/2012 | 3:59:40 AM
re: Is Juniper Eyeing H3C? Huawei-3Com Co. Ltd. was established in November 2003

n Headquarters in Hong Kong with principal operations in Hangzhou, China and R&D centres in Hangzhou, Beijing and Shenzhen

n US$160 million cash investment from 3Com

n Huawei contributed its enterprise networking business assets, including switches and routers, engineering and sales/marketing resources and related intellectual property

n Staff of approximately 3,500 highly-skilled employees, more than 55 percent of whom are employed in R&D

n Mr. Bruce Claflin, President and CEO of 3Com, is the Chairman of Huawei-3ComGÇÖs Board of Directors. Mr. Ren Zhengfei, President and CEO of Huawei, is the CEO of Huawei-3Com

Pete Baldwin 12/5/2012 | 3:59:39 AM
re: Is Juniper Eyeing H3C? Some folks do seem to think Juniper needs a bit of ordinary LAN equipment in its toolbox.

The first question, I suppose, is whether that's even true. If it is, there are alternatives besides H3C (as mentioned in the article) -- which do you like best?
zher 12/5/2012 | 3:59:39 AM
re: Is Juniper Eyeing H3C? "H3C has its own R&D and manufacture. In fact Huawei is re-selling the low-end/enterprise router and LAN switch made by H3C."

it's still 2 days away from 4/1
ozip 12/5/2012 | 3:59:38 AM
re: Is Juniper Eyeing H3C? If JNPR is going to acquire H3C, they better do it fast. No that 3Com has control, it should take them long to stuff this up in the same way they have stuffed everything else they touch.

On a more serious note, in the distant past I had some involvement with Huawei and seperatly H3C of JVCO as it was then called. I could never figure out where Huawei ended and H3C began. Untangling the complex sales model is a far bigger issue for Juniper than product fit.

photon2 12/5/2012 | 3:59:36 AM
re: Is Juniper Eyeing H3C? Huawei would go into a meeting with Juniper to sell Ethernet product...leaves meeting...contacts customer on side to sell routers...Juniper left out of deal. Everyone knows how agressive these guys are...only partner if you're up for being dumped.
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